The Small Business, Enterprise and Employment Bill became an Act (the Act) on 26 March 2015 when it received Royal Assent (to read the Act, click here). The Act is wide ranging but, from a corporate law perspective, the provisions of most importance to companies are those contained in Parts 7 (transparency) and 8 (filing requirements). The most significant of these relate to the new requirement on companies that do not already make disclosures under chapter 5 of the FCA's disclosure and transparency rules to publicly disclose the interests of persons with significant control over them, and a ban on corporate directors (subject to limited exceptions). For more information on these provisions and the other provisions contained in Parts 7 and 8, see our July 2014 article.
The Government has stated that it is on track to implement Parts 7 and 8 of the Act in phases between now and April 2016. Key points of the provisional timetable (which can be viewed in full here) are:
- May 2015: companies will no longer be able to issue bearer shares - the nine month period for companies to convert existing bearer shares will start at this time,
- October 2015: the prohibition on corporate directors (with exceptions), measures to suppress the ‘day’ element of the date of birth of directors on the public register at Companies House, and measures to speed up the strike-off procedure will come into force,
- January 2016: the requirement to keep a register of people with significant control (PSC) will come into effect, and
- April 2016: the requirement to file information on people with significant control at Companies House, changes to the statement of capital regime and the new annual return process (the confirmation statement) will come into force.
Key steps in the implementation process to meet the above timetable are:
- current consultation on exceptions to the ban on corporate directors - this is further to the consultation which closed in January this year (see below for more information),
- a consultation this summer on draft regulations for the PSC register, with a view to laying them before Parliament in the autumn. This will include the regulations setting out:
- the regime for protecting information of individuals at serious risk of harm,
- the way in which a PSC’s control should be recorded on the register,
- additional matters that must be noted in a company’s PSC register, and
- exemptions from the requirement to keep a PSC register, and
- development of the statutory and non-statutory guidance in relation to the PSC register, with publication scheduled for this autumn.
Consultation on exceptions to the ban on corporate directors
Last year, the Department for Business, Innovation and Skills (BIS) consulted on possible exceptions to the ban on corporate directors. BIS has recently opened a further consultation on the point because, as it acknowledges, the responses received opened its eyes to the practical uses of corporate directors that it had not fully appreciated before. In particular, a number of new areas where it was felt an exception would be helpful were highlighted. These were:
- corporate service providers,
- Lloyds of London members,
- non-executive directors,
- property management companies,
- special purpose vehicles,
- life assurance companies, and
- minority investments in start-up companies.
The responses also helped to reinforce that using a corporate director can have significant benefits and can be useful in more areas than BIS originally consulted on. This has led BIS to consider alternative approaches to the exceptions regime so that it can put options to new ministers after the election.
As part of this process, BIS is exploring the possibility of implementing a "principles" based exception under which a company would only be able to appoint a corporate director if:
- all the directors of the corporate director are "natural persons" (ie, individuals), and
- the law under which the corporate director is established requires certain details of its directors to be maintained in a publicly accessible register (nb, this limb would not be needed if only UK companies are allowed to be appointed as corporate directors).
The consultation is by way of an on-line questionnaire which closes on 27 April 2015. To access the questionnaire, click here.
The scale of change in relation to the measures contained in Parts 7 and 8 of the Act is not insignificant, with companies having to implement completely new measures, such as the PSC register, as well as getting used to amended procedures such as the revised annual return process. The scale of change is heightened by the fairly tight timetable for implementation. The fact that opinions are being sought and taken into account is welcome, particularly as regards the impact of the prohibition on corporate directors which have become an established corporate management tool. Hopefully, sufficient flexibility will be maintained to balance the needs of corporates with the improved transparency that the Government wants to achieve.