Is your charity or trading subsidiary prepared for the significant shifts in company law?

If your charity is a company, or has a trading subsidiary or corporate trustee company, you need to be aware of these developments which our team outlines below. 

• Increased powers for Companies House to query filings, correct information on the Register of Companies, share information with other agencies and issue penalties. Companies House is likely to become a more proactive regulator. Charities should ensure that information on the Register or filed with the regulator is accurate, for example in relation to directors, PSCs and articles of association. 
• Introduction of identity verification for directors, PSCs and anyone filing documents with Companies House. In due course, it will become necessary for all these people to verify their identity with the regulator, or alternatively through an ‘authorised corporate service provider’, such as a law firm. 
• More stringent requirements in relation to member information, including in relation to the register of members and a one-off requirement to submit a full list of members to Companies House. It is not uncommon for charities to be unsure of who their members are, or for the register of members not to have been updated, so this is something to check. 
• Updated requirements for registered addresses. Companies will need to provide Companies House with an email address at which the regulator can contact the company. In addition, there will be a prohibition on using a PO Box or unstaffed address as the company’s registered office. 
• Improved procedures for applying to withhold information from the public register. The starting point will remain that key information on individuals involved in companies will be public, but it will become easier to apply to remove personal information in particular circumstances.
• Introduction of a new offence of failure to prevent fraud, applicable to larger organisations (meeting two of the following criteria: (i) more than 250 employees, (ii) more than £36 million turnover, (iii) more than £18 million assets). Affected charities should review their financial controls and anti-fraud policies. Notably, this part of ECCTA will also apply to CIOs.

ECCTA became law in October 2023 but the changes are coming into effect in stages. 

In practical terms, the changes mean you will almost certainly need to take some additional administrative steps and they have the potential to cause particular issues for some charities. To this end, Companies House has produced information and factsheets that may be useful. 

In some cases, failing to comply with the new requirements can attract civil or criminal liability, financial penalties and/or disqualification as a director/trustee. 

Charities should take proactive steps to ensure compliance with ECCTA, including by:

• Reviewing information held by Companies House for accuracy
• Reviewing the register of members and ensuring this is up to date 
• Providing a registered email address when required
• Ensuring the charity has an appropriate registered office address. 
• Ensuring trustees, PSCs and anyone else with responsibility for filing documents with Companies House (e.g. the company secretary) are prepared for the identity verification process
• Reviewing policies and procedures relating to financial controls and fraud prevention

For some charities, the changes could prompt consideration of converting to CIO status. This would mean the charity would no longer be regulated by Companies House or subject to most of the changes introduced by ECCTA. 

We will continue to monitor the impacts of ECCTA and provide ongoing updates as the full extent of the reforms become clear. In the meantime, if you have any questions or concerns about ECCTA, you can arrange a call with a member of our experienced Charity team. 

We can offer your charity a compliance review as well as training for trustees and/or the SMT regarding the consequences of ECCTA. 

We are also experienced in advising charities unsure of who their members are, and on changing the structure of a charity whereby the only members are the trustees.

Our team also advises on the CIO conversion process and can provide further information on this, including the advantages and disadvantages of CIO status.