On 26 March 2015, the Small Business, Enterprise and Employment Act 2015 (the “Act”) received Royal Assent. Its phased implementation will bring with it a number of significant reforms to UK company law with a view to improving the transparency around who owns and controls UK companies. This article looks at those corporate aspects of the Act which we think will be of particular interest to public limited companies.
ABOLITION OF BEARER SHARES
On 26 May 2015, section 84 of the Act came into force and had the effect of amending the Companies Act 2006 to prohibit the creation and issue of new bearer shares. Bearer shares are shares in a company that are not registered in the company’s register of members but are owned by whoever physically holds the share warrant applicable to such share(s). As such, the holders of bearer shares are not easily identifiable and the shares themselves are readily transferable meaning that they have become synonymous with illicit activities such as tax evasion and money laundering.
The rationale behind this abolition of bearer shares is to eliminate a means of facilitating such illegal activity. In addition, the abolition will enable the UK to fall in line, and ensure compliance, with internationally adopted standards.
Holders of existing bearer shares have until 26 December 2015 to surrender their bearer shares to the company in exchange for registered shares. If all bearer shares have not been surrendered or exchanged within this timeframe, the shares will need to be cancelled and the relevant monies paid into court by the company. This approach will ensure the complete elimination of the concept of a bearer share from UK company law.
Any companies whose articles of association contain provisions relating to bearer shares will be able to remove such provisions without having to pass a special resolution.
RESTRICTION ON CORPORATE DIRECTORS
Since 2008, UK registered companies have been required to have at least one director who is a natural person. Under the Act, unless an exemption applies, companies will no longer be permitted to appoint corporate directors.
The Department for Business, Innovation and Skills (“BIS”) has consulted on potential exemptions for companies where the use of corporate directors presents a low risk of illicit activity and is of high value to the running of a company. Feedback from the consultation has promoted the use of corporate directors within large groups in that it, inter alia, significantly reduces administration costs and ensures that signatories are more readily available.
Readers will be interested to see the outcome of the BIS’s deliberations on the responses to the consultation as the proposed exemptions include corporate directors of:
- quoted companies, including AIM companies;
- large private companies (but possibly only those within large group structures); and
- subsidiaries of the above type of companies where another group company is appointed as a corporate director.
The Government has announced that this is intended to come into force in October 2016 and any existing directors who are not natural persons will automatically cease to be directors 12 months after the provision has come into force.
REGISTER OF PERSONS WITH SIGNIFICANT CONTROL
Readers may have heard about the new requirements set out in the Act for companies to keep a register of people with “significant control” over the company, and to make that register (the so called PSC register) public. Readers should note that these provisions (set for implementation in 2016) will apply to all UK registered companies, other than an issuer to which Chapter 5 of the Disclosure and Transparency Rules sourcebook applies. Accordingly, all AIM companies that are required to make significant shareholder disclosures in accordance with Chapter 5 will not be required to maintain a PSC register.