The Small Business, Enterprise and Employment Act received Royal Assent on 26 March 2015. It covers a diverse range of subjects, including changes to companies legislation. These are designed to increase corporate transparency and accountability, remove red tape around company administration and prevent abuse.
There are three key elements to the transparency provisions:
- UK-incorporated companies will have to collect information about any person with significant control over the company (a PSC). This is broadly an individual who, directly or indirectly, holds over 25 per cent of the shares or voting rights in the company, can appoint or remove a majority of the directors or who can otherwise exercise significant influence or control over a company. Companies will have to keep a register of PSCs and file information about them at Companies House. These rules will apply to all UK-incorporated companies other than publicly traded companies that have to make disclosures under Disclosure and Transparency Rule 5 and any companies specifically designated under secondary legislation.
- There will be a ban on corporate directors, though the Government may by regulation make exceptions to this. The Government has been consulting on what form the exceptions should take. The latest proposal on which it is now consulting is to allow corporate directors provided all the directors of the corporate director are natural persons and their details are available in a public searchable register.
- There will be a ban on bearer shares. Existing holders of bearer shares will be able to convert their shares into registered shares, subject to following the procedures and timetable in the legislation. In its timetable, BIS has indicated that companies will have to keep a PSC register from January 2016 and file PSC information at Companies House from April 2016. The ban on non-exempt corporate directors is likely to come into force in October 2015, with a one-year transition for existing non-exempt corporate directors. The ban on bearer shares will come into force two months after Royal Assent, with a nine-month surrender period.
There are changes to the rules on shadow directors, directors' disqualification and the powers of insolvency practitioners. The key changes are as follows:
- The general statutory duties of directors in the Companies Act 2006 will apply to shadow directors (i.e. those whose instructions and decisions the other directors accept and implement) where and to the extent that they are capable of applying.
- UK directors' disqualification proceedings will be possible where a person has committed an offence in connection with running a company overseas. It will also be possible, subject to a public interest test, to bring disqualification proceedings against a person who, though not a director, caused a director’s unfitness resulting in that director's disqualification. New powers will enable the Secretary of State to apply for a compensation order against a disqualified director where the misconduct has caused identifiable loss to creditors.
- The ability to bring wrongful and fraudulent trading actions, currently available to liquidators, will additionally be available to administrators. Both administrators and liquidators will be able to assign those claims, as well as claims for preferences and transactions at an undervalue, to third parties.
Removing red tape
The key changes are as follows:
- Companies will (probably from April 2016) no longer have to file an annual return. Instead they will have to check and confirm that they have delivered, or are delivering with their confirmation statement, the information they were required to deliver to Companies House during the preceding 12 months.
- Private companies will (probably from April 2016) be able to opt out of keeping all or any of their registers of members, directors, directors’ residential addresses, secretaries and PSCs. A company doing so will have to ensure that equivalent information is available at Companies House, where it will be on the public register and available for inspection.
- On a statement of capital it will (probably from October 2015) no longer be necessary to specify the amount paid up and unpaid on each share. Instead companies will have to state the total amount unpaid on all shares.
- Companies House will (probably from October 2015) be able to strike companies off the public register more quickly. For voluntary strike-off, the time will come down from 3-4 months to about 2 months. For compulsory strike-off, it will come down from 5-6 months to about 3.5 months.
- Simplification of the Companies House, audit authority and shareholder notification requirements imposed on a company and its auditor when the auditor resigns, is removed or not reappointed. (These auditor-related changes are in the Deregulation Act 2015, which also received Royal Assent on 26 March 2015. There is as yet no commencement date.)
Prevention of abuse
There will be some changes to Companies House filing procedures designed to help prevent abuse.
- The day of a director's date of birth will be kept off the public record at Companies House to reduce the risk of identity theft. (This will not apply to private companies opting to use the public register in place of a private register.)
- There will be a procedure under which third parties can object to a company's choice of registered office where the company has no authority to use that address.
- On appointment of a director or secretary it will be the company that must confirm to Companies House that the person has consented to act rather than the person themselves. There will be a procedure under which someone appearing at Companies House as a director can apply to have their name removed if they did not consent to act.