ECCTA received Royal Assent on 26 October 2023, with the aim of preventing abuse of UK Corporate structures and tackling economic crime. ECCTA will introduce what has been advertised as ‘the biggest changes to Companies House since corporate registrations were established in 1844’.
EECTA will impact any charity established as a company itself, or which has, or may in the future have, a company within its structure (e.g. a trading subsidiary company or a corporate trustee). As charitable companies are dual regulated by both Companies House and the Charity Commission, it is crucial to be aware of the scope of the reforms.
As you can imagine for such large changes, the provisions of ECCTA are being brought in by a phased roll out.
The first tranche of provisions came into force on 4 March 2024 and included:
The later phases of ECCTA are expected to bring in wider reforms, but we are awaiting further information on this. We have summarised the anticipated upcoming changes below, but no action needs to be taken on these yet:
In addition, ECCTA introduces a new criminal offence – failing to prevent fraud. This offence will be relevant to large charities which are corporate bodies or partnerships and who meet two out of three criteria below:
The failure to prevent fraud offence confers liability on the organisation when a specified fraud offence is committee by an employer or agent of the organisation for the organisation’s benefit and the organisation did not have ‘reasonable’ fraud prevention procedures in place. As such, it is very similar in requirements to the current Bribery Act. Any charities who meet the criteria above must ensure they have sufficient fraud prevention policies and procedures in place before this comes into force.
While technically not a provision of the EECTA, implementing a ban on corporate directors has been a key part of the government’s consultations around corporate transparency. As such, the Government has confirmed its intention to bring into force its existing powers to restrict the use of corporate directors in parallel with ECCTA. Only UK corporate entities with ‘legal personality’ will be permitted be appointed as corporate directors and the directors of these corporate directors must be natural persons and must verify their identity.
We will be keeping a careful eye on when these further changes are being brought in, so now is a great time to sign up to our email updates and if you would like to get ahead of these changes please get in touch.
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