The Economic Crime and Corporate Transparency (ECCT) Bill has progressed through its legislative stages and is anticipated to receive Royal Assent in Autumn 2023. This marks a crucial step in the government’s strategy to combat economic crime, recognised as a significant threat to the UK, while also enhancing transparency among UK Limited Companies.
The ECCT Bill will bring about substantial changes to the roles and powers of Companies House, directly impacting Small and Medium Enterprises (SMEs) and Owner-Managed Businesses (OMBs). Here are some key highlights:
- Financial Reporting: All small companies will be mandated to submit comprehensive accounts, which include a Balance Sheet, Profit and Loss account and directors’ report.
- Micro-Entities Reporting: Micro-entities will now be required to submit a Balance Sheet and Profit and Loss statement.
- Abridge and Filleted Accounts: These simplified accounts will be abolished.
- Identity Verification: Companies House will conduct identity verification checks for both new and existing directors and Persons with Significant Control (PSCs).
- Enhanced Powers for Companies House: Companies House will be granted additional authority to scrutinise information and reject filings.
- Corporate Directors Restrictions: Stricter limitations will be imposed on the use of Corporate Directors.
- Audit Exemption Statement: Companies must include a statement asserting their eligibility for audit exemption.
- Registered Company Email Address: The introduction of a registered company email address to be provided to Companies House.
- Registered Office Address: Companies House will be empowered to amend a company’s Registered Office address if deemed inappropriate.
While specific implementation dates and additional information format requirements remain uncertain, it’s prudent to anticipate that small and micro-businesses may be subject to these disclosure obligations for financial years ending in 2025.
The mandate to disclose sensitive Profit and Loss information may pose challenges for SMEs and OMBs. Nevertheless, these rules will apply uniformly to all businesses. Hence, it’s essential for businesses to assess the ramifications of heightened disclosure requirements and how stakeholders like customers, suppliers, lenders, investors, and employees will perceive the increased transparency of their financial performance and position.
The definitions of small and micro entities remain unchanged. A company qualifies as small if, in a given year, it meets any two of the following criteria:
- A turnover of £10.2 million or less
- £5.1 million or less on its balance sheet
- 50 employees or fewer
A company is classified as a micro-entity if, in a year, it satisfies any two of the following criteria:
- A turnover of £632,000 or less
- £316,000 or less on its balance sheet
- 10 employees or fewer
At SeavorChartered, we are committed to monitoring these impending changes closely and will keep our clients informed as necessary. Our approach has always been to disclose the minimum compliant information, providing businesses the flexibility to choose whom they share their sensitive data with.
If you have any questions concerning these changes and their potential impact on your business, please do not hesitate to reach out to us. We are here to assist you.