Companies House Is Ramping Up Prosecutions For Late Accounts

Introduction

Companies House, the UK companies registry, has begun to crack down significantly on companies that make late account filings, with directors personally exposed to criminal prosecution and disqualification. The uptick in action derives from the introduction of the Economic Crime and Corporate Transparency Act 2023 (ECCTA) which provided greater funding and powers to Companies House, as discussed in our earlier post. These included powers to challenge the veracity of information on the register, a broader ability to share information with other law enforcement agencies, and the introduction of a wider range of civil financial penalties. 

Importantly, enforcement of these enhanced legislative tools has been strengthened by the addition of nearly 500 new staff to the registry’s workforce in the past year, leading to an increase in both civil financial penalties (against the companies concerned) and criminal prosecutions (against the directors).

Greater scrutiny: companies

The new civil financial penalty provisions, aimed at the companies themselves, took effect in May 2024 and allow fines up to £10,000 to be imposed in a streamlined fashion directly by Companies House. For the year ending April 2025, the registry issued 317,985 penalties, a nearly 10% increase year-on-year. Because ECCTA staggered the introduction of its wide range of new powers, some are still in their relative infancy, and we therefore expect the trend to continue. This statistical trend aligns with what we have been seeing in practice, as companies navigate a much more assertive approach from the registry on late filings. ECCTA has also expanded the scope of “non-compliance”, to extend financial penalties for late filings of confirmation statements, not just company accounts as previously stipulated under the Companies Act 2006 (the CA 2006). 

Companies House assesses perceived breaches against a risk-based compliance framework which categorises companies into five levels. Companies may be categorised as level 1 or level 2 if their breaches are considered occasional and their general compliance practice of a high standard, with level 4 and level 5 reserved for those that are considered to have wilfully or negligently disregarded their statutory obligations. At the lower end, companies are likely to merely receive guidance and support from Companies House in ensuring any breach is not repeated, and any penalty is likely to be in the form of a default statutory notice or a civil financial penalty which, depending on how late the filing is, will be between £150 and £1,500 (for private companies or LLPs) rather than the maximum of up to £10,000. 

Greater scrutiny: directors

Criminal prosecution will also be initiated against individuals where the case is deemed to be of a sufficiently serious or repetitive nature, and is therefore categorised at the higher end of the compliance framework. Late filing of accounts has long been a potential criminal offence for directors of the company responsible, under section 451 of the CA 2006. The maximum penalties for summary offences include an unlimited fine and a criminal conviction, with director disqualification measures applied for up to five years. Prior to the introduction of ECCTA however, Companies House had faced criticism for taking a relatively light touch to enforcement of these provisions. This is now changing rapidly, with the registry adopting a more robust approach to enforcing penalties for non-compliance, and pursuing prosecutions with greater frequency: up to a total of 2,670 directors during the most recent year, a number that looks set to keep rising.

One recent high-profile example is that of Sanjeev Gupta, who along with four other company directors is facing prosecution by Companies House for alleged failure to file accounts on time for a number of entities within his GFG Alliance corporate group. Gupta and the other defendants pleaded not guilty, and he has brought a judicial review regarding the limitations on arguments he is able to make in his defence. 

Gupta’s case demonstrates the strictness of the provisions: directors can be prosecuted even if they were unaware that the accounts were late. Instead, the onus is on the director facing prosecution to prove that they took “all reasonable steps” in seeking to ensure the accounts were filed on time. This is the statutory defence available under section 451 of the CA 2006 and is often referred to as the “reverse burden” principle, because it somewhat inverts the standard practice in criminal law whereby the burden is on the prosecution to prove a case. The word “all” is particularly imposing from the perspective of directors: the defence cannot be used by a director that only took some, or even most, reasonable steps.

Lessons going forward

It has never been more important for companies to ensure they have sufficient processes in place to file accounts on time, a particularly difficult task for large and complex corporate group structures. Such processes must include contingency plans capable of addressing the occasional, inevitable error or delay. In the event that deadlines appear likely to be missed, early proactive intervention in coordination with legal advisers and accountants can help mitigate the damage, and lines of communication can be opened with the registry where necessary. 

As Companies House adopts an increasingly stringent posture, penalties and prosecutions look set to rise further under their new powers. The remaining question is whether companies and directors can meet these higher standards of scrutiny with their own higher standards of compliance.