Is your charity ready for the latest requirements of the Companies House reforms?

The Economic Crime and Corporate Transparency Act 2023 (ECCTA) has been introducing significant reforms to Companies House in stages, aiming to enhance transparency and combat economic crime.

While these changes are primarily targeted at curbing fraudulent activities, they will have notable implications for UK charities, especially those structured as charitable companies, community interest companies (CICs), or those operating trading subsidiaries.

What has already been introduced?

The main changes already introduced:

• All companies must now maintain an “appropriate address” as their registered office. This address must be one where documents delivered are likely to come to the attention of someone acting on behalf of the company, and where delivery can be acknowledged. PO boxes are no longer acceptable. Additionally, companies are required to provide a registered email address for official communications with Companies House. 
• Companies must now confirm annually that their activities are lawful, reinforcing the commitment to legal compliance. 
• Companies House has increased incorporation and annual filing fees.

What will be new in 2025?

From Autumn 2025, mandatory identity verification requirements by Companies House are set to take effect. The ECCTA mandates that directors, persons with significant control (PSCs), company secretaries, and individuals filing on behalf of a company must verify their identities. This can be done through the GOV.UK One Login service, using biometric passports, UK photo driving licences, or other approved photo IDs.

Alternatively, verification can be conducted in person at designated Post Office branches or through Authorised Corporate Service Providers (ACSPs).

Identity verifications will be a compulsory part of incorporations and new appointments of directors and PSCs.  A 12-month transition phase will also begin to require all existing directors and PSCs to verify their identities as part of the filing of the annual confirmation statement.

What are the implications for charities?

• Increased Administrative Burden: All entities registered at Companies House will need to ensure that all relevant individuals, including trustees and senior management, comply with the new identity verification requirements. This will involve gathering the necessary documentation, coordinating verification processes, and maintaining accurate records. For smaller charities with limited administrative resources, this could represent a significant burden.
• Enhanced Governance and Transparency: The new requirements aim to improve the accuracy and reliability of information on the Companies House register. For charities, this means greater transparency and accountability, which can enhance donor confidence and public trust. Verified identities will help ensure that those in control of charitable funds and operations are legitimate and accountable.
• Potential for Non-Compliance Penalties: Failure to comply with the identity verification requirements can result in severe penalties, including fines and restrictions on the ability to make statutory filings. For charities, non-compliance could lead to reputational damage and operational disruptions, affecting their ability to attract funding and support.
• Impact on Trustees and Directors: Trustees and directors who fail to verify their identities within the specified timeframe may be marked as ‘unverified’ on the Companies House register. This status could disqualify them from acting as trustees or directors, leading to governance challenges for charities. Ensuring that all trustees and directors are aware of and comply with these new requirements will be crucial.
• Digital Transition Challenges: The move towards digital identity verification may pose challenges for some charities, particularly those with limited access to technology or digital literacy.

What should charities be doing now?

• Prepare early: All affected charities should start preparing for the new requirements well in advance of the mandatory deadline. This includes identifying all individuals who need to verify their identities and ensuring they have the necessary documentation.
• Training and Awareness: It will be crucial to provide training and raise awareness among trustees, directors, and staff about the new requirements. Charities should ensure that everyone understands the importance of identity verification and the steps involved. This will help facilitate a smooth transition and ensure compliance.

The new identity verification requirements introduced by Companies House represent a significant change for UK charities. While these measures aim to enhance transparency and prevent economic crime, they also pose challenges in terms of compliance and administration.

We are able to advise and support you with these changes so if you would like any further information or specific guidance, please do contact us.