Companies House: Companies House approach to financial penalties - Guidance

On 27 September 2024, Companies House published a document (Guidance) explaining the approach it will take in the context of the Registrar of Companies’ new ability to issue financial penalties under the Economic Crime and Corporate Transparency Act 2023 (Financial Penalty) Regulations 2024 (FP Regulations). The FP Regulations came into effect on 2 May 2024.

When a financial penalty can be issued

The FP Regulations enable the Registrar to impose a financial penalty on a person if satisfied, beyond reasonable doubt, that the person has engaged in conduct amounting to a relevant offence under section 1132A Companies Act 2006.

Depending on the offence, this can be:

• A fixed penalty, so a set amount based on the offence, previous behaviour and other factors
• A daily rate penalty, so a daily penalty for each day that the offence continues
• A combination of a fixed penalty and daily rate penalty

Warning notice

If the Registrar suspects that a person has engaged in conduct amounting to a relevant offence, then a written warning notice will be sent to that person. The Guidance sets out what will be included in a warning notice and the steps to be taken if a warning notice is received. The recipient should either take the required action or make a “representation” by email or in writing to Companies House within 28 days of the date of the warning notice.

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 to the person who was issued the warning notice. The Guidance sets out the matters that will be covered in a penalty notice, including how and when to pay the penalty and how to appeal it.

Calculation of penalty

The Guidance explains how the amount of a penalty will be calculated. Calculations of financial penalties will be based on the seriousness of the offence (minor, serious or very serious) and whether it is the first, second or third offence of the same type. If the recipient of a warning notice complies with the requirements in it within 28 days, they will not receive a financial penalty.

Financial penalties will increase for repeat offenders. However, the Registrar may consider prosecution instead of a financial penalty where the case warrants it.

Appealing a penalty notice

The Guidance explains that penalty notices need court permission (County Court in England) to be appealed. The only grounds for an appeal are that the decision to issue a financial penalty, the level or type of financial penalty or any condition stated in the penalty notice:

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

The Guidance specifies the time periods for such appeals and the consequences of not complying with a penalty notice. Non-compliance with a penalty notice that is not appealed is likely to result in an additional daily default penalty and the Guidance does state that if an individual or their company commits the same serious or very serious offence 3 times in 5 years, Companies House may consider prosecution.

(Companies House, Companies House approach to financial penalties – Guidance, 27.09.2024)

Companies House: Companies House enforcement policy - Guidance

On 30 September 2024, Companies House published a policy statement setting out its approach to enforcement when it identifies non-compliance or breaches of the law in relation to the register of companies it maintains.

The policy statement sets out Companies House’ principles (including the compliance framework) and approach to enforcement. As well as providing advice and published information, the enforcement methods available to Companies House include:

• imposing financial penalties (and see the relevant guidance on that published by Companies House here);
• civil actions such as court ordered filing of documents (including accounts);
• criminal prosecutions; and
• asking the courts to disqualify people from being company directors.

(Companies House, Companies House enforcement policy – Guidance, 30.09.2024)

FCA/BoE: Final rules relating to the Digital Securities Sandbox

On 30 September 2024, the Bank of England (BoE) and the Financial Conduct Authority (FCA) published a joint policy statement, final guidance and other materials setting out their approach to implementing and operating the UK’s Digital Securities Sandbox (DSS).

The regulators have largely maintained the approach and guidance as consulted on in CP24/5.

The BoE and FCA have opened the DSS for applications. The DSS is a regulated live environment that has been created to test new and developing technologies across financial markets (such as distributed ledger technology, enabling sandbox entrants to perform activities traditionally associated with central securities depositaries and trading venues.

The BoE have established:

• A webpage that sets out eligibility for the DSS and gives details of the application process.
• The DSS dashboard, which provides key operational information and updates for entrants and participants in the DSS.

(PS24/12: Digital Securities Sandbox joint Policy Statement and Final Guidance, FCA, 30.09.2024)

ASTG: Draft recommendations and consultation report

On 27 September 2024, the Accelerated Settlement Technical Group (ASTG) published a draft recommendations report and consultation (the Report).

The ASTG was established following one of the recommendations made in a report published by the Accelerated Settlement Taskforce.

The draft recommendations set out in the Report are:

• Recommendation Zero. This is the scope of instruments that will be covered by the implementation of T+1. There are two scenarios:
  • Firstly, that the UK migrates ahead of the EU and Switzerland. In this case, some instruments such as exchange traded products and Eurobonds will be exempted pending a subsequent transition to T+1 by the EU and/or Switzerland.
  • Secondly, that the UK, EU and Switzerland migrate to T+1 together. In this case, it would be a straight transfer of all instruments currently within the scope of the Central Securities Depositories Regulation (909/2014).
• Principal recommendations. These cover the critical post-trade activities that must be capable of completion efficiently if the UK’s transition to T+1 is to be successful, and cover success criteria, settlement, FMIs, static data, corporate actions, securities financing and FX.
• Additional recommendations. These consider environmental issues that must be addressed if the UK is to maximise the efficiency gains delivered by T+1 but are not essential to its implementation.

The consultation closes on 31 October 2024.  A final version of the recommendations will be published at the end of the year.

(UK AST Technical Group Draft Report and Recommendations (kpmg.com))