A significant new Bill has been introduced into Parliament, the Small Business, Enterprise and Employment Bill (the Bill). This Bill includes the measures which are intended by the Government to improve corporate transparency, increase trust in UK business and simplify company filing requirements.
The Government committed at the G7 summit in June 2013 to reforms designed to increase transparency in the ownership and control of companies in order to help in the fights against tax evasion, money laundering and terrorist financing while improving the investment climate and fostering a greater level of trust in UK companies. The Government's proposals were set out in the Government responses published in April to views received on the Transparency and Trust Discussion paper published in July 2013. It also committed to improve the regulatory climate for companies by slimming down regulation where that was appropriate and the Company Filings Requirements consultation paper was published in October 2013 which contained a package of suggested deregulatory proposals. We reported on details of the proposals in the two response papers in our May newsletter (click here to read our article for details of the response on Transparency and Trust and click here to read our article for details of the response on company filings).
The relevant provisions covering these areas are included in Parts 7, 8 and 9 of the Bill. We plan to comment in more depth on the proposed changes in due course but set out below a brief indication of the changes to come. The measures in Parts 7 and 8 will be brought about by a number of changes to the Companies Act 2006 (CA 2006).
Measures in Part 7 (Companies: transparency)
- the introduction of a requirement for companies to keep a register of people with 'significant control' over a company and for that information to be kept also on a public register at Companies House. This will be known as the PSC register. Individuals will be deemed to have significant control for the purposes of the register if they ultimately own or control more than 25% of a company's shares or voting rights
- companies will have an obligation to gather the information on 'significant control' and shareholders will be obliged to provide information on their holdings so that the register can be kept
- a prohibition on the creation of new bearer shares with transitional arrangements for the mandatory cancellation or conversion of existing bearer shares within nine months of the legislation coming into effect
- the introduction of a requirement that all directors must be natural persons with a prohibition on the appointment of corporate directors
- extending the general duties of directors to shadow directors where, and to the extent that, they are capable of applying, and
- expanding the exceptions to the CA 2006 definition of shadow director to make it clear that directions or instructions given in exercise of a function conferred by or under legislation or advice or guidance issued by a Minister of the Crown would not be considered the actions of a shadow director.
The Bill contains provisions allowing the Secretary of State to make regulations setting out exceptions to the requirement that all directors must be natural persons though no exceptions are set out in the Bill. There will be a grace period of one year from the legislation coming into force for corporate directors after which they will no longer be deemed to be directors.
Measures in Part 8 (company filing requirements)
- removing the requirement for an annual return at a fixed point in the year and replacing it with an obligation to confirm at least once in a 12 month period that company information held at Companies House is correct and up to date
- allowing private companies to opt out of keeping certain registers (the register of directors, the register of directors' residential addresses, the register of members and the register of secretaries) and instead to keep the information on the public register
- measures to protect information about a person's date of birth when that information is provided to Companies House
- introducing a requirement for a statement of capital to specify only the aggregate amount unpaid on the total number of shares rather than the current requirement for the amount paid up and unpaid on each share to be provided
- provisions to make it simpler to remove inaccurate registered office addresses from the public register
- simplifying filing requirements when directors are appointed, providing directors with information regarding their statutory duties as directors and providing a means of resolving disputes about directors' appointments, and
- reducing the period it takes to strike off a company from six months to three months.
Measures in Part 9 (directors' disqualification regime)
These measures will be brought about by amendments to the Company Directors Disqualification Act 1986 and include:
- expanding the matters a court must take into account when determining the unfitness of a director
- a new provision to enable disqualification proceedings to be brought in the UK against persons convicted of company-related offences abroad
- provisions to enable the disqualification of a person who controls a director and causes their misconduct
- enabling the Insolvency Service to act on a wider range of information from other regulators
- increasing the time limit for the Insolvency Service to take action against a director
- a new provision to allow a compensation order to be made against a director who has been disqualified to increase the likelihood of creditors being compensated, and
- aligning bankruptcy restrictions in Great Britain and Northern Ireland.
There is clearly a great deal of information and detail in the Bill to be digested and a number of changes to processes and procedures will be required. Some of the changes are more significant than others. The introduction of the PSC register is likely to place quite a burden on certain companies as they are obliged to seek out the necessary information for inclusion in the register. Companies which are issuers for the purposes of the Disclosure and Transparency Rules (eg with shares on the Official List or AIM) are exempt from this new obligation because such companies already have an obligation to make information about major shareholders public. Although there was discussion about whether Limited Liability Partnerships should be included in the PSC regime they are not currently covered by the relevant provisions of the Bill.
In terms of timing, we understand that the Government is hoping that this legislation will have completed its passage through Parliament by March 2015.