Background

The Economic Crime and Corporate Transparency Act 2023 (the Act) seeks to prevent economic crime and to enhance the transparency of companies and other legal entities.

It is part of a wider policy of government to tackle corporate abuse, money laundering, fraud and identity theft. The Act provides greater powers to the registrar of companies (the Registrar) and (together with the Economic Crime (Transparency and Enforcement) Act 2022) underpins the government’s commitment to strengthen the corporate registration framework and transform the role of Companies House. 

Identity Verification

A key component of the reforms set out in the Act is the introduction of an identity verification regime, with the objective of improving the accuracy and reliability of the information held by the Registrar and preventing fraudulent appointments. 

Who Will Be Subject to the Identity Verification Process?

New and existing company directors, people with significant control of a company (PSCs)¹ and those presenting documents for filing at Companies House will need to comply with the provisions of the Act and verify their identity with the Registrar.²

How to Comply With Identity Verification

There are two methods for complying with identity verification: 

• Directly with Companies House; and
• Indirectly through an authorised corporate service provider (ACSP).

Direct verification with Companies House will be, in the main, via a digital service and the verified person will be linked to a document such as a passport or driving licence (a primary identity document). Technology will be used to match a photograph taken by the individual to their likeness in the primary identity document. Companies House will provide alternatives for those without access to, or otherwise unable to use, the digital service.

Indirect verification will involve using a third party such as a legal adviser or formation agent authorised by the Registrar as an ACSP. The ACSP regime requires such third parties to be registered with a supervisory body for anti-money laundering purposes (for example, the Solicitors Regulation Authority for solicitors in England and Wales) and, therefore, have an existing obligation to conduct due diligence on their clients. An ACSP will be able to provide a service to verify the identity of those individuals subject to the regime. ACSPs must carry out verification in accordance with the required standards set out in legislation and this must be confirmed in a statement by the ACSP to the Registrar. 

An individual (including an ACSP) will be given a unique identifier number once verified. It is expected that individuals will only be required to verify their identity once (unless Companies House requires otherwise) but individuals will need to confirm their identity for each new appointment. 

When Do the Identity Verification Provisions Come Into Effect?

Companies House published a policy paper on 24 October 2024, outlining a transition plan for the changes set out in the Act with the following expected timelines in relation to identity verification (the timeline is subject to parliamentary time being available):

• By spring 2025, introduce the first steps to allow professional service providers to register to become ACSPs. This will allow them to carry out identity verification services for their clients. Additionally, Companies House will allow individuals to complete voluntary identification verification.
• By autumn 2025, commence the new identity verification requirements where all directors and PSCs for new incorporations will be required to verify their identity as part of the incorporation process. Identity verification will also be compulsory for all newly appointed directors and new PSCs. There will be a transition period of 12 months for existing directors of existing companies to comply with identity verification (companies will be required to provide identity verification credentials for their directors when their confirmation statement is due) and existing PSCs will also be subject to identity verification by way of transitional arrangements.
• By spring 2026, Companies House will require identity verification for those presenting documents for filing (including the requirement for a third-party service provider filing on behalf of a company to be registered as an ACSP).
• By the end of 2026, it is expected that the transition period will be completed for all those subject to the identity verification regime and Companies House will start sanctions for any noncompliance.

Next Steps

The Act introduces some of the most significant changes to Companies House since corporate registrations were established and the identity verification regime is a key part of the reforms.

Companies should prepare by ensuring that the board is up to date with the timetable for the reforms and ensure that directors, PSCs (and relevant officers of relevant legal entities and those presenting documents for filing at Companies House have identity documentation readily available.

Footnotes