A Bill to prevent abuse of the UK economy and support enterprise by reforming Companies House and limited partnerships, and strengthen the broader response to economic crime.
Economic Crime and Corporate Transparency Bill 2022-23: Progress of the Bill (737 KB , PDF)
The Economic Crime and Corporate Transparency Bill 2022-23 (Bill 154) is a government bill introduced in the House of Commons on 22 September 2022. Its three stated objectives (PDF) are:
Second reading was on 13 October 2022 and the Bill completed its Commons Committee stage, in nineteen sittings, on 29 November 2022. Remaining Commons stages are scheduled for 24 and 25 January 2023.
Most of the Bill’s measures would extend across the UK. Legislative consent motions are being sought from each of the devolved administrations.
The Bill follows the Economic Crime (Transparency and Enforcement) Act 2022, which was fast-tracked through Parliament in March 2022 in response to Russia’s invasion of Ukraine.
During the passage of this earlier Bill the Government committed to introducing a second economic crime bill early in the 2022-23 session of Parliament. The Bill then featured in the May 2022 Queen’s Speech.
The Bill has six Parts.
Companies House is the UK’s company registrar. The UK is one of the quickest and cheapest places in the world to set up a company. UK companies can usually be set up within 24 hours using an online form, for a £12 fee.
But Companies House is not a regulator, so lacks powers to query documents submitted to it, and to investigate companies it suspects are being used for fraud or money laundering. The Government accepts that aspects of the UK’s easy-to-use company regime have made it particularly attractive to criminals (PDF).
In May 2019, the Department for Business, Energy & Industrial (BEIS) strategy published a consultation on company reform. It was followed by three further consultations published in December 2020.
Part 1 of the Bill (as introduced, clauses 1 to 98, and now clauses 1 to 107) would seek to deliver the “biggest upgrade to Companies House” since the UK first introduced a register of companies in 1844. Some of the key changes (as introduced) are:
BEIS estimates the total cost of the changes to be £289m, with an annual direct cost on businesses of £18.9m. But it assesses the current value of information on the companies register to be between £1 and £3 billion, so that a 5% improvement in the quality and usefulness of this information could more than cover the costs of the measures to businesses.
Alongside the Bill, an “all-encompassing transformation” of Companies House is taking place, including having fewer paper-based administrative roles in favour of analytical work, and greater digitisation and modernisation of its systems.
The measures in Part 1 have been broadly welcomed by stakeholders, including the Law Society and the UK Anti-Corruption Coalition of 17 anti-corruption groups.
Anti-corruption group Transparency International (TI) said the reforms were “much-needed” but left gaps such as by failing to prohibit UK companies from being controlled by “opaque offshore companies”.
TI, the Centre for Financial Crime and Security at the Royal United Services Institute and Spotlight on Corruption all argue – whether through the Bill or otherwise –the Government should commit to increase the cost of setting up a company to well above its current level of £12.
The Government added nine new clauses to Part 1 at Commons committee stage. These new clauses seek to allow for: (1) Part 1 to apply to overseas companies; (2) rectification of the register relating to invalid service and principal office addresses; (3) the Secretary of State to require businesses to identify discrepancies between its own information and that on the public register; and (4) the registrar to omit from public inspection company names for companies that have been directed to change their name.
Many largely technical and consequential Government amendments were also made. The only Government amendments divided upon were amendments to clause 32 (passed along party lines by 10 votes to 7). These amendments provided that a sanctioned person would only be disqualified from being a director if those sanctions related to asset-freezing.
No non-Government amendments or new clauses were made or added to Part 1 during Committee stage.
Limited partnerships (LPs) are a specific type of business structure in UK law.
There is an important difference in arrangements for Scottish limited partnerships (SLPs) – they have a separate legal personality. This meant that until 2017 they could be registered without giving details of individuals or companies who owned the business.
Earlier concerns about the wider lack of transparency of UK business structures had led to the creation of the Register of Persons with Significant Control in 2016. This was extended to cover SLPs in 2017. The number of LPs registered in Scotland had risen by 30% in 2016, compared with 5% across the rest of the UK. SLPs in particular had also been implicated in major international money laundering scandals.
To update limited partnership law across the UK and improve transparency, the Government consulted on various proposals in 2018, publishing its response the same year.
The proposed reforms would:
In addition, many of the reporting arrangements would bring requirements for limited partnerships into alignment with those for registered companies. So various changes in other parts of the Bill would also be relevant to limited partnerships across the UK.
The committee agreed (without division) four new clauses proposed by the Government. One of these would specify how individuals might be exempted from meeting new requirements for identity verification on the grounds of national security. The other three would make further provisions relating to dissolving and winding up limited partnerships.
The committee also agreed numerous Government amendments – many of them technical or consequential to other changes – without division. The Opposition proposed several amendments and new clauses. They were all withdrawn or not called.
The Economic Crime (Transparency and Enforcement) Act 2022 (the EC(TE) Act) introduced a beneficial ownership register of foreign entities (such as companies) that own UK property, known as the Register of Overseas Entities. This register became operational on 1 August 2022 and is administered by Companies House. Overseas entities have until 31 January 2023 to register their beneficial owners.
Part 3 of the Bill would amend the EC(TE) Act to maintain consistency with changes to the Companies Act 2006 made by Part 1 of the Bill; and make minor and technical changes.
No amendments were tabled to Part 3 during committee stage, but 10 new Government clauses were added. The new clauses are largely intended to make the Register of Overseas Entities more accurate and reflect changes being made in Part 1. They were all added without divisions.
Part 4 would amend the Proceeds of Crime Act 2002 to explicitly apply criminal and civil asset recovery powers to cryptoassets.
Among other things, in relation to criminal recovery Part 4 would:
In relation to civil recovery Part 4 would:
The Government tabled technical amendments to the civil recovery provisions intended to ensure consistency in the drafting. They were agreed without division.
The Government also tabled a new clause and schedule which would amend the Anti-Terrorism, Crime and Security Act 2001 and the Terrorism Act 2000 to provide for civil recovery powers equivalent to those contained in the Bill. These were also agreed without division.
Part 5 makes several discrete changes relating to money laundering, terrorist financing and the regulation of legal services. These include:
The Government tabled amendments to Part 5 which were agreed without division, including:
Part 6 contains general clauses (such on the title and territorial extent of the Bill) typically found at the end of Bills.
Economic Crime and Corporate Transparency Bill 2022-23: Progress of the Bill (737 KB , PDF)
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