The UK’s corporate crackdown: What multinational company directors must know

The UK has introduced its most significant reforms to corporate compliance in nearly 200 years through the Economic Crime and Corporate Transparency Act 2023 (ECCTA). These changes don’t just affect UK companies, but any organisation with a presence in the UK, even those with small operations. 

The reforms give Companies House, the UK’s official registrar of companies, sweeping new powers to scrutinise and reject inaccurate information, strengthen checks on corporate data, and clamp down on fraudulent filings.

As part of the ECCTA, the Failure to Prevent Fraud criminal offence came into effect in September, followed by mandatory ID verification in November after a 7-month period of voluntary registration.

Overseas directors in particular, face additional hurdles, from technical bottlenecks to limited verification options for foreign and non-biometric documents. This means they are more at risk of penalties, and regulators are showing no signs of leniency. Firms that fail to comply will likely be made examples of, as seen with previous regulations such as GDPR, where companies initially took a relaxed approach, believing their existing processes were sufficient, before being prosecuted.

The bottom line is clear: companies with a UK presence must move quickly if they want to ensure compliance and avoid severe penalties.

Mandating identity verification

ID verification for directors, persons with significant control (PSCs) and LLP members is now mandatory as of the 18^th November. This includes any overseas directors of companies registered in the UK.

Yet, awareness remains low. A Vistra pulse survey in October found that 30% of directors surveyed were unaware of ID verification and its deadline altogether. Furthermore, according to the latest data from Companies House, only around one million out of an estimated seven million individuals, or around 14% of those affected by the requirement have completed the process.

This challenge is even greater for overseas entities, particularly if English isn’t the first language of the directors, and they have fewer verification options than UK-based individuals.

More than half of directors surveyed remain non-compliant with ID verification, despite its deadline, though 75% are concerned about potential penalties for non-compliance, suggesting that overseas entities are keen to comply, but may be struggling to identify the options available to them.

Overseas directors must be equipped with the tools to achieve compliance. Failure to verify identity can lead to unlimited fines for businesses, as well as prevent directors, PSCs and the corporates they represent from filing documents, participating in acquisitions, or remaining on the register, causing both lasting operational and reputational damage.

A lack of solutions

Overseas directors face a narrower range of options to complete ID verification. Those without biometric passports cannot verify directly through Companies House and must instead use UK-based Authorised Corporate Service Providers (ACSPs).

Even when directors do have biometric passports, language barriers can create confusion, as they may have to rely on automated web translations. Meanwhile, UK-based directors can complete the process in person through the Post Office, an option completely unavailable to overseas directors, highlighting an even greater imbalance in accessibility.

Lessons learned from the ECTEA

The ECCTA’s predecessor, the Economic Crime (Transparency and Enforcement) Act 2022 (ECTEA), introduced the Register of Overseas Entities, requiring foreign organisations buying, selling, or transferring UK property to register their beneficial owners or managing officers with Companies House.

When that register launched, many entities delayed compliance until the last minute, resulting in major backlogs and missed deadlines. The same risks apply now. Companies House has already urged firms to act early and “save time later” when meeting ECCTA obligations.

Companies House has made clear that it will adopt a strict stance: during the Corporate Governance Institute’s annual conference, it confirmed that non-verified companies will be removed from the register after the deadline, regardless of technical issues or bottlenecks. The crackdown on fake directors, from “Holy Christ” to “Mickey Mouse”, has already begun, with the National Crime Agency reporting more than 11,500 companies were struck off the register in July this year.

A gateway to global governance

The UK has long been seen as a global benchmark in corporate governance, consistently ranking among the top 20 countries for transparency, governance, and ease of doing business in world rankings by Transparency International, World Economics Research and World Bank Group.

For overseas firms, compliance in the UK can serve as a gateway to better governance worldwide. It provides a robust compliance framework that can be replicated across other jurisdictions, strengthen investor confidence, and position companies as trusted partners in global markets.

This is evident through the 66% of firms surveyed by Vistra, who confirmed they were more likely to approve the establishment of new UK subsidiaries or entities as a result of the ECCTA’s verification requirements.

What should firms do?

With ID verification now mandatory, companies who have not yet verified need to make this a top priority. Begin by mapping all entity structures to identify every director, PSC, and relevant member, including those overseas, and complete the verification process now.

Businesses need to review all ID, PSC, and filing records to ensure accuracy, and identify any inconsistencies across group entities. Conducting full risk assessments covering both ID verification and the Failure to Prevent Fraud offence will help to uncover and address compliance gaps.

Training is also key. Senior leaders and directors should receive clear guidance on their new legal duties under the ECCTA to foster accountability and confidence in navigating the new regulatory landscape.

Crucially, the ECCTA should not be treated as a box-ticking exercise. It’s an opportunity for organisations to strengthen governance practices and communication between UK and overseas directors, which we know can be a frequent source of friction.

The time to act is now or risk severe penalties later.

Dana Wagstaff, Global Product Lead, Entity Management, at Vistra

Contact Vistra today to ensure your organisation is compliant under the ECCTA. As an Authorised Corporate Service Provider (ACSPs) we can support seamless ID verification for directors, PSCs and LLP members worldwide and ensure your organisation meets every Companies House requirement with confidence.