ECCTA 2023 – Update – Financial Penalties

Helen Mather, Partner

Companies House has provided updated guidance in relation to its approach to financial penalties under the Economic Crime and Corporate Transparency Act 2023 (Financial Penalty) Regulations 2024 (regulations).

When can Companies House issue financial penalties?

If the Registrar of Companies is satisfied beyond reasonable doubt that the person has engaged in conduct amounting to a relevant offence under section 1132A of the Companies Act 2006, they can impose a financial penalty on said person.

A relevant offence includes any offence under the Companies Act 2006 other than an offence relating to company secretaries (Part 12), resolutions and meetings (Part 13) or audit (Part 16). There are many offences under the Companies Act 2006 including, by way of example, failing to file certain documentation at Companies House or filing inaccurate information.

The financial penalties can be:

• a fixed penalty – a set amount based on the offence, previous behaviour and other factors;
• daily rate penalty – a daily penalty for each day that the offence continues; or
• a combination of the above.

What will happen?

1. Warning notice: If the registrar suspects that a person has engaged in conduct amounting to a relevant offence, they may issue a warning in writing to that person. If you receive a warning notice you should either take the required action within 28 days or make a representation to Companies House to explain any information you wish for them to consider.
2. Penalty notice: After the end of the period stated in the warning notice, the registrar, if satisfied beyond reasonable doubt that the person has engaged in conduct amounting to a relevant offence, may issue a penalty notice (which must be in writing) to the person who was issued the warning notice. The penalty notice must set out certain things such as the grounds for issuing the financial penalty, the type of penalty and how to pay the penalty. Penalties can be appealed by applying for court permission but only on the grounds that the level or type of penalty or any condition:

• is unlawful;
• is irrational or unreasonable; or
• has been made on the basis of a procedural impropriety or otherwise contravenes the rules of natural justice.

What happens if you don’t comply?

If you do not pay within 28 days of the penalty notice date, the debt can be recovered by the registrar through a debt recovery agency or the court.

If you still do not comply with the requirement set out in a warning notice, Companies House can issue further penalties. If the same serious or very serious offence is committed 3 times in 5 years, Companies House may consider prosecution.

How to avoid a penalty?

Make sure you carry out your responsibilities to Companies House (such as filing confirmation statements, accounts and other documents correctly and on time) and stay up to date with changes to UK company law. If you or your company needs any assistance with a warning notice, a penalty notice or generally carrying out and understanding your responsibilities to Companies House, please get in touch with the Kuits Corporate Team today at info@kuits.com.