In 2024, the UK will witness changes to the corporate and commercial landscape, principally aimed at enhancing transparency, fostering innovation, and adapting to the evolving economic and political situation.
Below are some of our predictions for the trends and changes over the next 12 months.
Companies House Reforms
Whilst these reforms will be staggered (not least due to the need to put necessary technology in place), in 2024 we will see some key changes resulting from the new Economic Crime and Corporate Transparency Act coming into force.
These changes will provide the Registrar with enhanced powers, including imposing new compliance obligations, dealing with fraudulent entities and sharing information with other government departments.
The new rules also provide that:
- Anyone setting up, running, owning or controlling a company in the UK (including company directors) will be required to verify their identity with Companies House.
- The Registrar will have new powers to query information filed by companies.
- The filing of accounts will transition to a system in which software (rather than paper / online filings) must be used.
- When making an annual confirmation statement, a registered email address must be provided, and a formal statement will need to be given that all future activities of the company will be lawful.
Please see our detailed article on the upcoming changes here.
Commercial / Consumer
In 2024, there will be developments to the regulation of online advertising, including new rules under the Online Safety Act to prevent false advertising. Once the new rules are in place, there will be a consultation by Ofcom to identify a code of practice, meaning that the recommended measures are not likely to apply until late 2025.
In the EU, the Digital Services Act (DSA) will come fully into force next month requiring online platforms to ensure their users can identify the advertiser behind each advert and why they have been targeted. Targeting adverts using special category personal data or at children will be banned.
There are no express equivalent measures in the UK reforms but once the Digital Markets Competition and Consumers Bill (DMCC Bill) becomes law (expected to be in Autumn 2024), there may be comparable duties to those imposed in the EU under the DSA.
The DMCC Bill will be the year’s biggest consumer law development and B2C business will want to take note of some of the more important changes. The Bill, will grant the Competition and Markets Authority (CMA) a long-awaited expansion of its enforcement powers.
The CMA will no longer have to take court action or rely on unenforceable undertakings and will be able to directly impose fines of up to 10% of turnover as well as consumer redress measures.
Both UK traders and non-UK traders targeting UK consumers will be within scope. The CMA’s initial focus may be on traders misbehaving online or engaging in “greenwashing”, as both are priority policy areas.
Other changes of note from the DMCC Bill include:
- A ban on creating fake reviews.
- Dealing with subscription traps by introducing a stand-alone information and cancellation regime. New rules will mean that consumers must be provided with clear information (e.g., minimum duration) prior to entering a contract and must be able to exit in a straightforward manner. Businesses must also send reminders in a prescribed form about the end of a free / discounted trial, or that their contract is due for renewal. Much of the detail is to be addressed in secondary legislation, but businesses using subscription models will need to carefully review their processes to achieve compliance.
Business Immigration
Rules under a new plan aimed at reducing net migration are set to take effect early in 2024.
Notable adjustments include restrictions on care workers bringing family dependents to the UK and a nearly 50% increase in the minimum salary for skilled workers to £38,700. These proposed modifications will pose challenges for companies seeking to recruit migrant workers.
Artificial Intelligence (AI)
Whilst both the EU and UK will develop AI regulation in 2024, the strategies are likely to be very different.
In the EU, provisional agreement was reached on the AI Act at the end of last year and it should be adopted before the European Parliament in Summer 2024. The Act envisions a risk-based approach, prohibiting AI systems with unacceptable levels of risk. It covers AI output which is available within the EU and so will cover UK companies deploying AI services in the EU. There will be a two-year transition period for most provisions.
On the other hand, there are no plans to introduce primary legislation in the UK to regulate the safety of AI systems. Instead, the UK Government will devolve the responsibility to sector-specific regulators (e.g., the ICO and FSA) supported by general principles. These regulators should start publishing their guidance in 2024.
There is clearly a risk of inconsistency in how regulators approach their guidance and this may prompt the UK government to legislate.
Employee Ownership Trusts
The last few years have seen a significant rise in the number of business owners indirectly selling their companies to their staff via an employee ownership trust (EOT). This trend is likely to continue in 2024.
One employee ownership report published at the end of last year (Generation-EO-The-Great-Employee-Ownership-Succession-Opportunity.pdf (ownershipatwork.org)) surveyed 500 individuals who were aged 43 or older and held a higher than 10% stake in privately-owned SMEs (10-249 employees) across a variety of sizes, sectors and geographic locations.
The results of the survey estimated that two thirds of these owners (affecting 120,000 SMEs) are likely to sell or divest within the next 10 years, with at least 43% stating that the outcome is likely to be the sale or closure of the business.
For those businesses that will struggle to find a solution (particularly where management succession is unclear or the strategy has not reached fruition), employee ownership remains a credible candidate, providing a controlled process for transitioning leadership, ensuring business continuity and protecting jobs.
We can also expect some developments to the legislative regime applying to EOTs. Proposals currently under review include new rules regarding the constitution of the trustee board (restricting seller control and mandating representation from the employees and/or an independent trustee), along with legislative reform to confirm that gifts from the target to the trustees (to fund deferred payments) are not distributions.
The rule that deems the holder of 5% of any class of share to be a participator (even if that class makes up a small percentage of the total share capital) is also under review as this can be a disincentive for employees holding EMI options over an alternate share class and (if the workforce is small) can potentially lead to disqualification.
These are just some of the changes and trends that we expect to see in 2024. Further updates will be provided via our monthly Corporate Insights briefing throughout the year as well as our other regular blogs on ongoing legal developments.
If you would like to get in touch with us please call 01737 907492 or email [email protected] and a member of our expert team will get back to you.