Companies House has recently expanded its authority to scrutinise and challenge company names, a move aimed at bolstering corporate transparency and combating economic crime. This development is part of the broader Economic Crime and Corporate Transparency Act 2023, which introduces several significant changes to how company names are regulated.
In The Economic Crime and Corporate Transparency Act 2023 Part 1 - The Opportunities, David Impey explains that these new measures are designed to protect the public and maintain the integrity of the business register by preventing the misuse of company names for deceptive or harmful purposes.
Expanded Powers of Companies House
Under the new regulations, Companies House now has the power to reject or mandate changes to both new and existing company names if they are deemed potentially fraudulent or misleading. This authority extends retrospectively, meaning that any company name, regardless of when it was registered, can be challenged if it fails to comply with the updated rules.
Lower Threshold for Intervention
One of the most notable changes is the lowering of the threshold for rejecting misleading company names. Previously, a name had to be likely to cause harm to the public to be rejected. Now, the mere risk of harm is sufficient grounds for intervention. This means that companies must be more vigilant in ensuring their names do not pose any potential risk, even if the likelihood of actual harm is low.
Specific Prohibitions
The new rules also introduce specific prohibitions on certain types of company names:
- Names Containing Computer Code: Companies House can now reject names that include computer code, which could potentially disseminate malware. This measure addresses concerns that bad actors have been using company names to embed malicious code, posing a cybersecurity threat to those who download company databases.
- Names Suggesting Foreign Government Affiliation: Names implying a connection with foreign governments, agencies, or international organisations are now banned. This is to prevent bad actors from misleading the public by suggesting an affiliation with reputable entities like NATO or the United Nations.
- Misleading Impressions: The existing power to reject names that give a misleading impression of a company's activities has been strengthened. It no longer needs to be likely to cause harm; it only needs to pose a risk of harm to the public, regardless of their location.
Implications for Companies
These changes mean that companies must conduct thorough reviews of their names to ensure compliance with the new regulations. Failure to do so could result in Companies House mandating a name change, which would typically involve changing the company name to its registration number—a clear red flag to customers, suppliers, lenders, investors, and potential acquirers.
Practical Steps for Compliance
To avoid falling foul of these new rules, companies should:
- Review Existing Names: Assess all current company names to ensure they do not contain computer code, suggest inappropriate affiliations, or pose any risk of misleading the public.
- Monitor New Registrations: Implement a robust process for vetting new company names before registration to ensure they comply with the updated regulations.
- Stay Informed: Keep abreast of any further updates or guidance from Companies House regarding acceptable company names.
The enhanced powers granted to Companies House under the Economic Crime and Corporate Transparency Act 2023 represent a significant step forward in the fight against economic crime and the promotion of corporate transparency. By lowering the threshold for intervention and introducing specific prohibitions, these new measures aim to protect the public and maintain the integrity of the business register. Companies must take proactive steps to ensure their names comply with these new regulations to avoid potential penalties and reputational damage.
For the full session, please click here. David Impey covers the following topics during this course:
- The law in force now
- What to do about it – opportunities and issues
- The important changes still to come
- Key opportunities and challenges to consider now
- Planning for decisions you’ll need to make later
The contents of this article are meant as a guide only and are not a substitute for professional advice. The author/s accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article.
