In March 2015 the Department for Business Innovation & Skills announced that measures designed to make “the UK the best place in the world to start and grow a business” had become law. This was the Small Business, Enterprise and Employment Act 2015, which received Royal Assent on 26 March 2015, and will come into force over the next 12 months.
It followed Government consultations on enhancing the transparency of company ownership, increasing trust in business and reducing red tape for UK companies.
This article will look at the key practical implications for those readers and advisers involved in managing any changes in corporate governance and practice.
Directors’ duties apply to shadow directors
Shadow directors will be subject to the general statutory duties that apply to directors under the Companies Act 2006.
This is entirely logical but is now enshrined in legislation.
Bearer shares abolished
The creation of bearer shares (where title is evidenced by possession of a certificate) is prohibited and existing ones need to be surrendered for registered shares before the end of the year. Bearer shares not so surrendered and exchanged will be compulsorily cancelled.
Bearer shares are unusual in terms of normal businesses. However, if your company has issued bearer shares then you need to act now!
Abolition of corporate directors – in October 2015
Using a company to act as a director will be prohibited, although certain low risk exceptions for subsidiaries are being debated.
Take care as existing corporate directors will automatically cease to be directors one year and one day after the Act came into force.
We fear that this is going to catch many unawares!
Disqualification of directors to be made easier – in October 2015
There will be more factors to be considered when determining whether someone is unfit to be a director, including culpability, materiality of past conduct, track record, misconduct overseas and breach of sectoral regulation as well as general directors’ duties.
The intention is to minimise risky business decisions being made. We shall see!
Director appointment disputes – in October 2015
Companies House will write to all newly appointed directors to make them aware that their appointment has been filed on the public register and explain their statutory duties.
The aim of this provision is to get falsely appointed directors’ details removed from the register.
We shall see if this simple approach works to reduce this facet of ‘identity theft’.
Registered office disputes – in October 2015
Companies House will have new powers to tackle the unauthorised use of a registered office.
Striking off procedure shortened – in October 2015
Striking off a company from the register will be shortened to approximately two months.
This is a positive change to shorten a simple process.
New register of persons having significant control – in January 2016
Every company will be required to regularly maintain and keep available for public inspection a PSC register, which is a register of persons having significant control.
The principal objective is to prevent corrupt individuals from hiding behind secret companies.
This information will need to be filed at Companies House annually; and limited exceptions.
Option to keep certain statutory books at the central registry – in April 2016
Private companies will have the option to elect to keep information only on the register at Companies House to satisfy the obligation to maintain its statutory information.
We move into the era of electronic record keeping!
Abolition of annual returns – in April 2016
Companies will simply be required to deliver a confirmation statement that there have been no changes to information on the record, or if so, update the same accordingly.
This will be a welcome change and relaxation to the current process.
New statement of capital requirements for companies – in April 2016
Companies will be required to specify the aggregate amount unpaid on the total number of shares, which is expected to be easier to comply with.
A short implementation timeframe will create a challenging period for many companies. Companies with issued bearer shares or corporate directors must take action soon but the provisions dealing with the PSC register are likely to be the most burdensome.
There will be little time between publication of guidance on the meaning of significant control in October 2015 and the requirement from January 2016 to start keeping a PSC register, and just three months before the obligation of having to file the PSC register information at Companies House applies in April 2016.
Companies should begin addressing their concerns as soon as possible, while staying abreast of the new provisions and guidance.
Conclusions and Actions
A number of commentators have noted and the UK Government has itself expressed, the change to transparency of UK company ownership and control is significant with the UK is leading the way internationally; clearly pushing for “international recognition of the need for change” and “ambitious global outcomes”.
Whether the UK will be considered a welcome market leader in this area will be seen over the coming months as the Act’s reforms are implemented.