Corporate update: the latest corporate law developments December 2023

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In this month’s update we:

  • summarise the changes to be introduced by the new Economic Crime and Corporate Transparency Act 2023;
  • consider the relevant decision point in relation to an unlawful preference; and
  • explain how the Court of Appeal construed a ‘material adverse change’ warranty.

The Economic Crime and Corporate Transparency Act 2023: corporate implications

The long-awaited Economic Crime and Corporate Transparency Act 2023 (the Act) received royal assent on 26 October 2023. The Act introduces wide-ranging reforms to combat economic crime and to prevent the abuse of corporate structures.

Although the Act is now law, most of its provisions will not become effective until implementing legislation has been passed and the necessary system changes have been introduced at Companies House. This means that some central elements of the reform, such as identity verification, are unlikely to be operative until the end of 2024. Companies House has, however, confirmed that some significant aspects of the new regime will be implemented by early 2024 (see below).

This article focuses on the changes that the Act will make to company law in the UK, and the resulting practical implications for corporates.

Identity verification

Potentially the most significant of the Act’s reforms is the introduction of compulsory identity verification procedures for all new and existing company directors, persons with significant control (PSCs) and agents who file information at Companies House.

It will not be possible to incorporate a new company until its directors have been verified, and post-incorporation new directors will have to verify before their appointment is notified to Companies House. PSCs will also need to verify their identity and maintain that verified status as long as they are registered at Companies House.

Secondary legislation will be needed to clarify exactly how identity verification will work, but individuals will be able to verify directly with Companies House or through an Authorised Corporate Service Provider (ACSP). To obtain ACSP status, intermediaries and agents will have to be authorised by Companies House and be registered with a supervisory body for anti-money laundering purposes. Only ACSPs and verified individuals will be able to file documents at Companies House.

There will be a transition period for existing companies to comply with the new verification requirements and failure to comply by the end of that period may result in criminal sanctions and civil penalties.

“Appropriate” registered office and email address

All companies will need to ensure that their registered office is located at an “appropriate address”. This means that any document delivered there would be expected to come to the attention of a person acting on behalf of the company. PO boxes and unstaffed addresses are unlikely to satisfy this test.

Companies must also register and maintain an email address with Companies House where emails from the Registrar would be expected to come to the attention of the company. Email addresses will not be publicly available.

The Registrar has confirmed that both of these requirements are likely to come into force in early 2024.

Restrictions on company and business names

The Act increases the range of circumstances where use of a company name can be prohibited and gives the Secretary of State new powers to direct companies to change their names. These provisions are due to come into force in early 2024.

A company will not be able to adopt a company name where the name could be used to facilitate crimes, suggests a non-existent connection with a foreign government or international institution or where it contains a computer code. The Secretary of State will be able to direct a company to change its name if it falls into any of these categories and if it fails to do so within 28 days, the Registrar can remove that company’s name from the Register and replace it with the company number.

Registers and filings

The Act abolishes the requirement for companies to maintain their own registers of directors and directors’ residential addresses, secretaries and PSCs. Instead, this information will only be required to be filed and kept up to date at Companies House and the general public will rely on this central record. In contrast, all companies will now have to maintain their own register of members and will no longer have the option to keep this information on the Companies House central register. Companies will be given powers to ensure that their member information is kept up to date.


The Act introduces several other measures to try to reduce the misuse of companies. These include:

  • Lawful purposes: a requirement for all companies on incorporation to confirm that they are being formed for “lawful purposes” and to confirm that future activities will be lawful on each confirmation statement (these provisions are expected to come into force in early 2024).
  • Members: a requirement for companies to record the full names of individual shareholders in their registers and to provide a one-off full shareholder list with their first confirmation statement following implementation.
  • Directors: bringing into force of the ban on corporate directors (with limited exceptions).
  • Registrar’s powers: giving the Registrar greater powers to query information so that filings that seem incorrect or inconsistent can be scrutinised, rejected and in some cases removed from the register. This provision is expected to come into force in early 2024.


Although the Government’s implementation timetable for the Act has yet to be published, companies should take the opportunity now to review their compliance with those provisions that the Registrar has indicated will come into force in early 2024. These include ensuring that all registered offices and email addresses will meet the new requirements and that any existing or proposed company names will not fall foul of the increased restrictions.

Companies would also be well advised to check that their filings at Companies House generally are up to date and accurate. The new powers being granted to the Registrar to scrutinise information on the register means that we may well see a much more pro-active approach from Companies House in chasing up omissions or errors in filings.

Unlawful preferences: when is the decision to prefer made?

In Darty Holdings SAS v G Carton-Kelly as liquidator of CGL Realisations Limited [2023] EWCA Civ 1135, the Court of Appeal unanimously set aside the decision of the High Court, holding that the repayment of unsecured debt by Comet Group plc (Comet) to a connected party nine months before it entered administration was not a preference. The case usefully considers the point in time at which a company's desire to prefer should be gauged.

What is a preference?

A preference is a type of reviewable transaction – a transaction that can be set aside once a company is in liquidation or administration. Under section 239 Insolvency Act 1986 (1986 Act), a company is said to give a preference to a creditor if it does anything which, in the event of the company going into insolvent liquidation, results in that creditor being in a better position than they would have been if the thing had not been done.

To be challengeable under the 1986 Act, the preference must meet specified criteria, including that the company must have been influenced by a desire to prefer the relevant person. The desire to prefer must operate on the persons making the decision for the company (usually the directors) and it must be present at the time that the “operative decision” to proceed with the transaction is made.

Any decision as to whether, and at what point, a company had a desire to prefer will be based on the facts of each particular case, but the judgment in this latest decision provides some useful general commentary on the issue.

The facts

The key issue in this case was whether the repayment by Comet of an unsecured debt to its sister company (KIL) amounted to a preference under the 1986 Act.

The owners of Comet had entered into a share purchase agreement (SPA) for the sale of Comet in November 2011. The SPA confirmed that at completion, Comet would repay an intra-group debt that it owed to KIL. Notably, Comet was not a party to the SPA and, therefore, was not contractually bound by its terms. A director of Comet (who was also group general counsel) had been involved in the sale negotiations.

Following the satisfaction of relevant conditions, the share sale completed in February 2012 and new directors were appointed to Comet. They resolved that Comet would repay the debt as proposed. Comet subsequently went into administration and then liquidation.

At first instance, the High Court held that Comet’s repayment of the intra-group debt amounted to a voidable preference under section 239 of the 1986 Act. The Court found that the operative decision to give the preference was made in November 2011 by Comet’s director (who had been involved in the SPA negotiations,) and that the operative decision was influenced by a desire to prefer. The director’s decision was deemed to have been made on behalf of Comet so that by the time the new directors resolved to repay the debt in February 2012, their “hands were tied”.

The beneficiary of the debt repayment appealed the decision.

Court of Appeal decision

The Court of Appeal allowed the appeal, overturning the High Court’s decision based on a different finding of facts (rather than a disagreement as to the law).

The Court of Appeal found that the operative decision to repay the intra-group debt had been taken by Comet’s board in February 2012, and not (as held by the High Court) by Comet’s director when the SPA was signed in November 2011. There was no evidence to support the inference that the director had made a decision on behalf of Comet and, even if he had, it could not amount to an operative decision as it was conditional upon board approval being obtained. Although the SPA had provided a framework for the repayment of the debt, it was not until Comet’s new board actually considered the payment at completion, and passed the required authorising resolutions, that the operative decision was made.

It was agreed between the parties that the decision by Comet’s board to repay the debt in February 2012 was not influenced by a desire to prefer. As this was the point at which the operative decision to repay had been made, the repayment did not constitute a preference under section 239 of the 1986 Act.


The Court of Appeal has helpfully confirmed that it is the point at which a company makes its operative decision that will be relevant for determining whether it has a desire to prefer. Identifying that point in time will always be a fact-based assessment but the Court’s comments, particularly relating to conditional agreements, should prove useful in that task.

The Court confirmed that subject to the nature of the condition, an operative decision could be a conditional one. For example, a decision to buy land subject to the grant of planning permission could be characterised as an operative conditional decision. However, a decision to buy land “subject to contract” was not an operative decision at all. A decision which is conditional on board approval (or ratification) will not amount to an operative decision – a further decision by the directors will be necessary to make the operative decision.

How to evaluate ‘material adverse change’

The Court of Appeal has allowed an appeal by the sellers of an IT consultancy company, holding that the trial judge had erred in his interpretation of a material adverse change (MAC) warranty.


In June we reported on Decision Inc Holdings Proprietary Ltd & Anor v Garbett & Anor [2023] EWHC 588 (Ch) in which the High Court had to consider a MAC warranty in a share purchase agreement. That warranty stated that “Since [31 December 2017 (the date of the target’s last accounts)]…there has been no material adverse change in the…prospects of the Company”.

The judge held that assessing whether a breach of such a warranty had occurred meant comparing a baseline figure, being the expected or forecast level of the relevant metric at the time of the contract, with the actual figure at that time to ascertain whether the difference between the two was material.

The judge used the target company’s EBITDA as the relevant metric. Having compared a reasonable buyer’s expectations of the likely EBITDA for 2018 with the actual EBITDA, the judge said there had indeed been a material adverse change. So the buyer’s claim against the seller for breach of the MAC warranty succeeded.

But the seller appealed that decision.

The decision on appeal

In Decision Inc Holdings Proprietary Ltd v Garbett & Anor [2023] EWCA Civ 1284 the Court of Appeal has now held that the judge at first instance was wrong.

In particular, the Court held that:

  • The judge had used the wrong metric. Whilst the judge had equated “prospects” with EBITDA, the Court of Appeal held that, read naturally, “prospects” meant “chances or opportunities for success” in a more general way. As the Court pointed out, the parties had used the term EBITDA elsewhere in the agreement and could have done so in the MAC warranty had that been their intention. Instead, they had chosen to use the word “prospects” and so must have had something else in mind.
  • The judge had used the wrong dates when comparing the relevant metric. The judge had compared the expected level of the relevant factor on the contract date with the actual level on the same contract date. But the warranty required an assessment of the expected metric as at 31 December 2017 with that in October 2018 when the SPA was signed.
  • The judge had compared two different things. The warranty required a comparison between the company’s prospects as at 31 December 2017 with its prospects as at October 2018 not, as the judge had done, a comparison of a buyer’s reasonable expectations and the actual measurement. The MAC warranty was concerned with what the company’s “prospects” in fact were (at two different dates), not with what a buyer would have expected them to be.

As a result, the Court allowed the seller’s appeal and dismissed the buyer’s claim.


This is the latest in a number of recent decisions concerned with MAC provisions. The Covid-19 pandemic saw many businesses suffer in unanticipated ways and, in a spate of cases since 2020, acquirers of those businesses have attempted to rely on MAC provisions to recover their losses. This latest decision offers some welcome clarification on the approach the courts will take when interpreting those provisions and evaluating whether there has been a breach.

First published in Accountancy Daily.

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