Introduction

The UK’s corporate landscape is set to undergo significant reforms through the phased implementation of the Economic Crime and Corporate Transparency Act (ECCTA). The ECCTA is aimed at enhancing transparency of corporate records and deterring economic crime. These reforms, managed by Companies House, are being rolled out in phases, with full implementation targeted for completion by 2027.

Summary of the ECCTA’s Phased Implementation by Companies House

By Winter 2024 into 2025:

• Expedited Striking Off Powers: The Registrar will gain the authority to expedite the removal of companies that are found to have been formed on false pretences.
• Register Annotations: The Registrar will be empowered to annotate the register to indicate false or inaccurate information.

By Spring 2025:

• Checks on Authorised Corporate Service Providers (ACSPs): Companies House will undertake commence checks on ACSPs to authorise them for conducting verification services.
• Voluntary Identity Verification: Individuals will be given the option to verify their identity voluntarily.
• Residential Address Suppression: Companies House will begin assessing applications from individuals who wish to suppress their residential addresses from public disclosure.

By Summer 2025:

• Access to Trust Information: Companies House will start providing access, upon request, to certain Trust information held on the Register of Overseas Entities.

By Autumn 2025:

• Mandatory Identity Verification: Identity verification will become a compulsory part of the incorporation process for new directors and People with Significant Control (PSCs).
• 12-Month Transition Phase: All existing directors and PSCs will be required to complete identity verification, linked to their annual confirmation statement filings.

By Spring 2026:

• Compulsory Verification for Document Presenters: Verification will be mandatory for individuals presenting documents for filing.
• ACSP Registration Requirement: Third-party agents filing on behalf of companies must be registered as an ACSP.
• Rejection of Documents by Disqualified Directors: Companies House will reject documents submitted by disqualified directors.

By the End of 2026:

• Enhanced Limited Partnership Information: All limited partnerships will need to provide additional information.
• End of Transition Period: The 12-month transition period will conclude, and compliance measures will be enforced against those who have not verified their identity.

These changes aim to strengthen corporate transparency and deter economic crime, ensuring that all relevant parties comply with stringent verification and reporting standards by 2027.

Dixcart previously provided an update on these proposed changes and the previous article can be found here: The Economic Crime and Corporate Transparency Act 2023 – The Proposed Changes to Companies House Explained – Dixcart UK

Full details from Companies House can be found here: Economic Crime and Corporate Transparency Act: outline transition plan for Companies House – GOV.UK

If you have any questions and/or would like advice on the above topic, please contact us at: hello@dixcartuk.com or your usual Dixcart contact.

From 1^st May 2024, Companies House will be increasing its filing fees for various services as part of its broader initiative to improve the integrity of the UK registry under the Economic Crime and Corporate Transparency Act.

According to Companies House, these changes are intended to help facilitate the expansion of digital services provided by Companies House, increase the accuracy of information on the register and further protect against economic crime. It is important that businesses are aware of the key changes and manage their costs accordingly to ensure continued compliance with regulations.

Set out below are the main changes affecting company incorporation and the registration of overseas entities. For a complete list of fee changes please visit the GOV.UK website.

Key Incorporation and Registration fees:

Transaction	Old fee	New fee
Incorporation	£12	£50
Change of name	£8	£30
Confirmation statements	£13	£34
Re-registration	£20	£71

Key filing fees for the Register of Overseas Entities:

Transaction	Old fee	New fee
Registration of an overseas entity	£100	£234
Update fee	£120	£234
Application for removal	£400	£706

These changes represent a significant increase in costs, particularly regarding Overseas Entities. If you have any concerns or require assistance with registration or any of the above, contact us via email at hello@dixcartuk.com.

What is the purpose of the Act and who will it affect?

On 26^th October 2023 the Economic Crime and Corporate Transparency Act 2023 (ECCTA) passed into UK law, marking the most significant change to Companies House since its inception. Its leading principle is that Companies House will be afforded greater powers in a bid to tackle economic and financial crime and address other abuses of the register.

The changes will bring added responsibilities for new and existing directors, persons of significant control (PSCs) and any agents who file on behalf of a company, as Companies House will be able to impose sanctions for incorrect or misleading information, or if the company fails to comply with the new registration requirements.

Companies House plans to introduce measures from March 2024 onwards affecting the following entities:

• private limited companies
• public limited companies (PLCs)
• limited liability partnerships (LLPs)
• limited partnerships (LPs)
• community interest companies (CICs)
• overseas companies

Companies House published guidance in its blog on 22 January 2024 regarding the first set of changes coming into effect on 4 March 2024: Get ready for changes to UK company law – Companies House (blog.gov.uk)

What are the changes?

1. Confirmation statements and registered office addresses – from March 2024

Every company, including dormant and non-trading companies, will need to file a confirmation statement at least once a year, even if there have been no changes during the review period.

Furthermore, to ensure information on the register is accurate and up-to-date, companies will need to provide an appropriate address for the registered office to which correspondence will be received by a representative of the company. Companies will no longer be able to use a PO box as a registered office address, and Companies House will have powers to query and challenge addresses it believes to be inaccurate and, more widely, information it suspects to be incorrect. The enforcement tools at its disposal include:

• Financial penalties
• An annotation on the company’s record
• Prosecution
• Strike companies off the register

2. Statement of lawful purposes – from March 2024

When incorporating or registering a company, subscribers of that company will be asked to provide a statement confirming that the purpose of formation is for a lawful purpose, and that future activities will also be lawful.

3. Identity verification – date of introduction TBC

Another significant change is the future introduction of identity verification for all PSCs and directors of a company, including companies already on the register. To deter those setting up companies for illegal purposes, verification will need to be done either directly with Companies House or by using an Authorised Corporate Service Provider (ACSP), such as solicitors or accountants. For LPs, this must be done solely through ACSPs to ensure that information is from a trustworthy source.

Companies House has confirmed there is not yet a date of introduction and more information is to follow. For PSCs and directors of existing companies, there will be a transition period once introduced to allow reasonable time for adjustment to the new requirements.

Dixcart Legal is an Authorised Corporate Service Provider (ACSP) and can assist with verification.

4. Higher fees – date of introduction TBC

Companies House fees will be increasing in 2024 to cover the costs of the enforcement powers, although we await further guidance on what these fees will be.

5. Software-only filing – date of introduction TBC

Over the next 2 – 3 years, Companies House plans to shift towards a system of filing by software-only, applying to directors who file accounts themselves as well as third party agents like solicitors.

6. “Failure to Prevent Fraud”

Significantly, the ECCTA includes a new criminal offence which makes companies and partnerships liable for failing to prevent fraud by employees or representatives for the benefit of the organisation. Those who hold a position within the organisation of “senior manager” or higher will be liable for conviction if an economic crime is committed.

Further guidance is expected from Companies House as to when we can expect all measures to be implemented and updates will be released accordingly. For additional details see the gov.uk website.

For more information from us, or if you wish to discuss using an ASCP, please use our Enquiry form or email us at hello@dixcartuk.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

September 2023

August 2022 saw the introduction of the Register of Overseas Entities at Companies House in the UK following the Economic Crime (Transparency and Enforcement) Act 2022 (the Act) coming into force in March 2022. Pursuant to that legislation all overseas entities who own properties in the UK acquired at any time on or after:

• 1 January 1999 in England & Wales,
• 8 December 2014 in Scotland; and
• 1 August 2022 in Northern Ireland

are required to submit an application to the Registrar at Companies House detailing their beneficial owners unless they are exempt. 

An update statement must be filed every year by all overseas entities on the Register of Overseas Entities. The update statement requires the overseas entity to confirm that all the information about the overseas entity on the register is still correct, and update anything that has changed.

It is most important to bear in mind that it is a criminal offence if an overseas entity does not file an update statement. The overseas entity ID will become invalid until such time as the record is brought up to date.

Timings

According to Government guidance an overseas entities statement date is within a year of the date the overseas entity was registered, or within a year of your last update statement.

The overseas entity has 14 days from the “statement date” to file. After this, the filing will be considered to be late.

So for example, if the original application was registered on 22 September 2022 the first statement date will be 21 September 2023. The update statement will be due by 5 October 2023.

Overseas entities can find the updated statement by searching for the entity on the Companies House register.

What if nothing has changed?

An overseas entity must file an update statement even if there have not been any changes to the overseas entity and its beneficial owners during the update period. This confirms that the information on the register is correct.

What information needs to be reviewed and updated?

The overseas entity will be asked to review all the information shown on the register about the entity and its beneficial owners or managing officers. It must update any information that has changed.

The overseas entity may be asked to re-enter home addresses for individual beneficial owners and managing officers.

All information must be correct as at the date of the update statement.

Verification checks must be completed on any information that is being changed and on any new beneficial owners or managing officers that are being added. Such information will need to be verified by a UK regulated agent no more than 3 months before the date of the update statement.

We at Dixcart Legal are UK regulated agents and can assist with this process. Please contact us at hello@dixcartuk.com or call on +44 (0)333 122 0010 if you would like our assistance.

The verification process can take some time to complete therefore we strongly recommend that you contact us well in advance of  the statement date.

What if someone is no longer a registrable beneficial owner or managing officer?

As part of the update statement the overseas entity will need to tell Companies House:

• The date that any registrable beneficial owner or managing officer ceased being so during the update period and make sure that the information is correct as at that date.
• About anyone that both became and ceased to be a registrable beneficial owner during the update period. The information provided must be correct as at the date that the registrable beneficial owner ceased being one.

Authentication Code

An authentication code is a unique 6 character code that every overseas entity needs in order to file online. To request an authentication code you should search for the overseas entity on Find and update company information – GOV.UK (company-information.service.gov.uk) and select “Request authentication code”. The code will be sent to the email address held on record for the overseas entity.

Companies House fees

The Companies House fee for filing the update statement is £120.

What you will need to file an update statement

To file an update statement you will need:

• To sign in to or create a Companies House account
• The Overseas Entity’s ID number
• The overseas entity’s authentication code
• The name and email address of someone Companies House can contact about the update
• Details of the UK regulated agent who has undertaken any required verification checks, if relevant
• A credit or debit card to pay the Companies House £120 fee.

What happens if the update statement is late?

If an overseas entity does not file the update statement in time:

• It will be committing a criminal offence and could be prosecuted or fined.
• Its overseas entity ID will not be valid and it will not be able to buy, sell, transfer, lease or charge its property or land in the UK.
• A note will be added to the overseas entities’ public record stating that it has not filed its update statement.

Who can’t currently use the update service?

At present the following cannot use the update service:

• Where there are any trusts involved in the overseas entity; and
• Where any beneficial owners or managing officers have their personal information protected at Companies House.

In such instances the overseas entity needs to file the update statement on paper, even if it does not need to make any changes to the trust information. Further guidance can be obtained in such situations by emailing enquiries@companieshouse.gov.uk

Contact Dixcart Legal at hello@dixcartuk.com or call on +44 (0)333 122 0010 if you would like our assistance.

Published September 2023

It is common for contracts between businesses to contain provisions that are aimed at preventing one of the parties from competing against the other (often called “restraint of trade” clauses). The enforceability of such clauses has long been debated.

Under UK law the following requirements must be satisfied for a restraint of trade to be valid:

• the party imposing the restraint must have a legitimate interest that they seek to protect;
• the restraint must be no wider than is reasonable to protect that interest;
• the restraint must not be against public interest.

In a recent case the Supreme Court re-examined this area. The Court stated that two principles must be taken into account in determining the enforceability of a non-competition obligation:

1. The party which has the benefit of the restriction must establish that the non-compete clause was reasonable as between the parties, by showing that it not only protected that party’s legitimate interests but also that it went no further than was reasonably necessary in doing so.
2. Assuming the test in paragraph 1 above is met, the party subject to the restrictions has the burden of establishing that it is unreasonable due to being against public policy.

Of particular interest in this case is the Supreme Court’s consideration of the parties’ non-contractual intentions when entering into the contract. This means that legitimate interests do not need to be specifically referenced in the contract.

For a “legitimate interest” to be potentially protected, that interest does not have to be something which is directly related to the contract containing the restriction. In the case examined by the Supreme Court, the contract in question was a confidentiality agreement (also known as a non-disclosure agreement). Its purpose was simply to allow the flow of information from one party to the other, but the agreement contained a clause prohibiting the recipient of the information from exploiting it for its own purposes. This was found to be enforceable, even though the agreement did not express that the provider of the information had any obligations or expectation of its own in relation to that information.

Further Information

If you have any questions regarding the above, or require any assistance, please do not hesitate to contact Dixcart Legal on: hello@dixcartuk.com

This article covers some of the key issues which need to be considered when selling a company or a business. People often say they are selling but do not know how the transaction is to be structured, e.g. by selling the shares in the company (a share sale) or by the company selling the business and assets of the business (an asset sale). From a due diligence viewpoint the issues are similar, save where indicated below. For ease we just refer to selling a business here.

ASSET SALE V SHARE SALE

The form of sale transaction is generally decided by commercial issues.  However, taxation can be a very important commercial issue.  Accordingly, tax issues should be given due consideration at an early stage to avoid expenditure being incurred in pursuing what ultimately turns out to be the wrong course of action. Whichever structure is chosen will depend upon the specific circumstances of the seller and the buyer in each transaction. 

TRANSACTION MANAGEMENT

The sale of a business is very much a team process. The team will comprise of the seller(s), its lawyers, and accountants. Good transaction management will enable the team to work in a constructive and positive manner. This, in turn, should enable the sale to proceed smoothly.

REVIEW OF THE SELLER’S BUSINESS

The seller has two objectives in a disposal: 1) to maximise the post-tax sale proceeds – by maximising the sale price and minimising the tax burden; and 2) to minimise the on-going exposure of the seller to the buyer by way of the warranties and covenants given to the buyer.  The buyer wants to get a fair deal and minimise the amount of liabilities it takes on or at least be aware of them, so this is crucial as it may have a big impact on negotiations.

To achieve this the buyer will conduct a detailed and vigorous examination of the business.  To assist the seller in achieving its objectives, the seller’s advisers must know the business as thoroughly as the buyer’s advisers will know it following their due diligence exercise.  The seller’s advisers should review all documents before they are handed over to the buyer. The seller should therefore prepare for the buyer’s due diligence by first carrying out its own investigation. This should flush out any potential problem areas and give the seller time to try and resolve them. 

The areas that a review should cover depend on the relevant business, but should include some or all of the following:-

1. Financial: Statutory and management accounts; financial history; budget forecasts;

asset values and basis of valuation; tax position and liabilities; borrowing arrangements; off-balance sheet items; shareholdings (on a share sale).

• Legal: contract review; property review; corporate review (on a share sale); validation of a number of areas covered by paragraphs a, c, d and e. 
• Trading: plant and equipment details; business volumes; major customer details; major supplier details; contracts and trading terms; market information; agency arrangements; intellectual property details, protection status and licensing.
• Personnel: payroll details; general and individual employment/service contracts; trade union organisation and bargaining rights; redundancy arrangements; pension arrangements; other benefit details.
• General: premises details; environmental liabilities; contingent liabilities; research and development programmes and status; operational/commercial issues; areas of risk; strategic issues if the seller’s business is being merged with the buyer’s business.

HEADS OF TERMS

Heads of Terms (aka Memorandum of Understanding) are a non-legally binding document.  They are used to establish the business understanding of the deal; providing the parties with realistic expectations of the contents of the full contract.

CONFIDENTIALITY

The buyer’s due diligence will be carried out before entering into a formal binding contract.  The due diligence process will almost certainly involve the consideration of information in relation to business which is not generally available in the public domain.  Enforceable confidentiality undertakings should be obtained from any prospective buyer before any information is supplied by the seller.

Commonly, the confidentiality letter will not only impose confidentiality obligations on the prospective buyer but also restrict the use by that buyer of that information for the purpose of the evaluation of the business with a view to agreeing a contract for its purchase (i.e. allowing disclosure to key people, for example its bankers, lawyers, accountants and other advisers). However, this should only be permitted on the basis that the recipient is also under the same obligation to maintain the information as confidential.

If there is a breach of a confidentiality undertaking given by a prospective buyer, the seller of a business would invariably wish to obtain an injunction rather than sue for damages.  A well drafted confidentiality letter will ensure that such an injunction can be obtained quickly through the Courts. The use of a confidentiality letter will also help avoid “fishing expeditions” by competitors.

DUE DILIGENCE

Due diligence basically means an investigation of a business by a prospective buyer before entering into a contract.  There are a number of advantages to a buyer of a due diligence investigation.  These are:-

1. It picks up undisclosed liabilities: The general principle of English sales law is “caveat emptor” or “buyer beware”.  If you buy shares in a company, you buy the company with the liabilities that are in it. This is the main reason behind the due diligence exercise and the subsequent warranties and indemnities that will be based on that due diligence and will appear in the Share Purchase Agreement. This is also relevant on the sale of a business, although to a lesser extent, as the buyer will only inherit the liabilities that are specified in the Sale and Purchase Agreement. 
2. It helps with price negotiation: Initial prices are often negotiated with the buyer making a number of assumptions.  Due diligence can assess whether these assumptions are valid.  If not, the quality of the due diligence exercise will reflect the strength of argument in the re-negotiation of the price.
3. Assists drafting of Sale and Purchase Agreement: Due diligence by the buyer should be done prior to the drafting of the main Sale and Purchase Agreement, so that the lawyer knows what conditions, warranties and indemnities to draft in the contract. Due diligence helps identify the particular liabilities in respect of which warranties and indemnities are being sought by the buyer and, in essence, allows the lawyer drafting the contract to understand the issues surrounding the relevant business and to draft the contract accordingly.

SUMMARY

From a seller’s view point there are 3 keys rules to follow:-

(i)         Be professional at an early stage – look at the best structure to maximise proceeds and reduce liabilities.

(ii)        Prepare for due diligence: review all documentation and collate it in an orderly fashion.

(iii)       Use Heads of Terms and Confidentiality Letters to protect your business and assist the sale process.

If you have any questions regarding the above or require any assistance, please do not hesitate to contact Dixcart Legal on +44 (0)333 122 0010 or by email: hello@dixcartuk.com

Setting up a new business in the UK can be time-consuming and complicated, with a variety of different rules and regulations to consider. Dixcart Legal Limited (Dixcart Legal) can assist with understanding the legal requirements in a seamless way (as well as providing access to tax, IT, and payroll teams if required) so that founders and directors can focus their attention on the business. 

Set out in this note are some key considerations when setting up a company in the UK.

ISSUES TO CONSIDER BEFORE YOU SET UP A BUSINESS

• Where do I want to sell my products/services?
• Do I want to form an establishment in the UK or do I want to appoint a third party, such as an agent, initially?
• What is the cost of establishing a company in the UK?
• If I do want to set up a business in the UK, what sort of legal structure do I require?
• What rules and regulations do I need to comply with?
• Do I need to register for VAT?
• What do I need to do before I start trading?
• What do I need to do once I start trading?
• Do I need a property?
• Do I need a registered office in the UK?
• What name do I intend to use for my business?
• Do I need personnel?
• Will staff from overseas be working in the UK?
• Do I need a website?
• What data protection rules apply?
• Do I need trading contracts (e.g. terms of business or sale, distribution agreements)?

These are only a few of the considerations to take into account. Below, we have outlined the summary information and how Dixcart can help.

1. What legal structure should be used?

This should be one of the first things to consider. This decision affects the tax and national insurance contribution requirements, HMRC reporting obligations, the liability attached to the business and the documents needed.

There are four widely used business structures in the UK.  These are outlined below:

Sole Trader	The business is owned and run by one individual. There is no legal distinction between the owner and the business. The sole trader takes all of the profits but also all the liabilities of the business.
Partnership	Two or more persons conducting business together.Partners generally have unlimited liability and a partnership is not a separate legal entity. The Partnership Act 1890 governs how partnerships are run, but the default statutory position is usually not suitable.  We therefore recommend that written partnership agreement to set out how the partnership works, how each partner deposits money into and withdraws it from the business, the decision-making processes and plans for when a partner chooses to leave the business, becomes ill or is deceased.
Limited Liability Partnership (LLP)	This is a hybrid structure, between a partnership and a limited company.An LLP is a separate legal entity. It is registered at Companies House and is governed by the Companies Act.Members’ personal liability is limited.An LLP does not have shareholders or directors and is taxed like a partnership, meaning that profits are divided among the partners (members) who then pay tax on their own share at a rate appropriate to their circumstances.
Limited Company (this note focuses on private limited companies.  However, there can also be public limited companies, whose shares may be publicly traded.)	A limited company is a separate legal entity, which can be limited by shares or by guarantee. The members’ (usually called shareholders) liability is limited.  In the case of shares it is limited to the amount paid (and unpaid) on the shares they hold or, in the case of guarantee, to the amount they have agreed to contribute to the company’s assets if it is wound up.A company limited by shares is most common. Shares make it easier to pass on ownership of the business, provide different ways of managing tax affairs and possibly giving incentives to employees.Companies are governed by the Companies Act 2006. There are many rules to follow (with potential criminal penalties for breaches).

The most suitable structure will depend on the nature of the business.  Dixcart Legal can assist in navigating the advantages and disadvantages of each to help businesses make the correct choice.

• Regulations when setting up a Business in the UK

The choice of the legal structure will determine which regulations apply to the business.  For example, in the case of a limited company, the articles of association the company’s governing document), the name of the company and the details of the directors and shareholders must be registered at Companies House and are generally publicly visible.  In addition, there are statutory filing and record-keeping requirements.

There may also be industry-specific regulations, depending on the intended activities of the business.

• Personnel

A business is likely to engage one or more individuals from the start, most commonly as employee or consultant. An employee is an individual who works under a contract of employment, meaning that the individual agrees to serve the employer. A consultant is a self-employed individual working under a contract, who agrees to provide certain services to the employer.  The question of whether someone is an employee or a consultant is a mixed question of fact and law. 

The principal costs for an employer when hiring employees (other than the usual costs of recruitment and training) are base salary, pension contributions and employer national insurance contributions.  An employer may also choose to provide other benefits (such as share options) to attract appropriate talent to the business.

When recruiting, employers should consider employment law issues, as prospective employees may become entitled to claims even if they are never offered a job. For example, discrimination rules affect the whole recruitment process.  

Employers must observe UK immigration and visa requirements. In every case an employer must  verify an employee’s eligibility to work in the UK by inspecting originals of relevant documents (even for UK nationals). Visa applications may be necessary for certain individuals. 

When engaging an employee, employers must within the first two months of employment provide a statement of the terms of employment containing specific minimum information.  A full employment contract will contain more detailed terms.

The above issues are just a few key considerations for employers and are not exhaustive.

How we can help

Dixcart Legal Limited provides legal solutions and assistance to the business community globally and in the UK.  We can assist with all of the matters referred to in this note.

Further Information

If you have any questions regarding the above, or require any assistance, please do not hesitate to contact Dixcart Legal: hello@dixcartuk.com