Economic Crime and Corporate Transparency Act 2023 - the practical realities for companies and lenders

Hot on the heels of the Economic Crime (Transparency and Enforcement) Act 2022, the Economic Crime and Corporate Transparency Act 2023 (the Act) received Royal Assent on 26 October 2023. 

The Act will likely have far-reaching implications for both companies and their lenders. It introduces fundamental changes to the UK's corporate criminal liability regime and seeks to promote greater accuracy in the material maintained by the registrar of companies at Companies House. The Act aims to improve the transparency of UK companies and contribute to greater scrutiny of corporate criminal liability (including economic crime) in the UK. 

The implementation of the Act will be gradual via secondary legislation which will allow time for Companies House to provide necessary guidance (and potentially system updates). The changes to material maintained at Companies House are now firmly on the horizon.

There are some key changes that companies would be advised to start thinking about including in relation to their filings and records at Companies House to make sure they are compliant with the new regime. These measures also have potential knock-on effects on companies' debt facilities, and more particularly for lenders. 

In the debt finance world, lenders and their legal counsel have a sharp focus on borrowers' statutory compliance and will usually seek confirmation of this via the initial due diligence process and, going forward, via representations and undertakings from the obligors on their compliance with applicable laws and regulations.  

The impact of the changes will likely to be felt in several aspects of debt financing transactions including the due diligence process and need (and potential failure) to comply with agreed representations and undertakings, and also in filings required in finance transactions which will need to be factored in to deal timetables. The key changes introduced by the new regime that will likely have an impact on debt finance transactions are explored in detail in our new article.

We've also released a separate series of articles on the Economic Crime and Corporate Transparency Act 2023 which you can find here.