On 26 March 2015, the Small Business, Enterprise and Employment Act 2015 (the “Act”) became law and its various provisions will come into force over the next 12 months, starting today.
The main aims of the Act are to:
- increase transparency around who controls UK companies, and deter and sanction those who hide their interests;
- simplify company filing requirements to reduce duplication and improve flexibility in companies’ dealings with Companies House; and
- amend the directors’ disqualification regime to strengthen the rules that prevent a person acting as a director where that person has committed misconduct.
Provisions coming into force on 26 May 2015
Abolition of Bearer Shares:
The Act abolishes the use of bearer shares, which are shares in relation to which proof of ownership is a certificate rather than a register of holders.
There will be a period of nine months starting from today during which bearer shareholders will be able to voluntarily surrender their bearer shares for conversion into registered shares.
During the first month and at the end of the eighth month of this period, a company which has bearer shares in issue will be required to give notice informing its bearer shareholders of their right to surrender their shares and the consequences for not doing so.
If a shareholder fails to surrender his shares within the first seven months of this period, all rights attached to such shares (including the right to dividend payments) will automatically be suspended and any agreements to transfer the shares will be void. If the shares are subsequently surrendered, all accrued dividends will be paid (plus any interest).
During the three months after this voluntary surrender period, companies will be able to apply to court to have any outstanding bearer shares cancelled and will be required to give notice of such application to the relevant bearer shareholders. Within 14 days of cancellation by court order, a company must pay the nominal value of the shares cancelled, plus any unpaid dividends, into court and former bearer shareholders may (subject to certain requirements) apply to receive such funds.
The Act amends the Companies Act 2006 (“CA 2006”) to provide that the general duties of directors also apply to shadow directors where and to the extent that they are capable of applying. A shadow director is person in accordance with whose directions or instructions the directors of a company are accustomed to acting.
The definition of shadow directors in the CA 2006, the Insolvency Act 1986 and Company Directors Disqualification Act 1986 is also expanded to make clear that a person acting to exercise a function conferred by or under legislation will not meet the definition of shadow director.
Provisions likely to come into force in October 2015
Prohibition on corporate directors:
The Act amends CA 2006 to require that all directors be natural persons and prohibit the appointment of corporate directors. There will be a transitional period allowing corporate directors to resign and be replaced (if necessary). After the period of one year from the prohibition coming into force, any remaining corporate directors will cease to be directors, i.e. their appointments will automatically terminate.
The government is currently carrying out a consultation to determine whether there should be any exceptions to this prohibition, for example to allow for a corporate director where such company’s directors are all natural persons, and further details are expected later in the year.
The appointment of a new director currently requires notice to Companies House, by way of the relevant new director’s signature, that they have consented to act. A company will going forward be required to instead make a statement that a director has consented to act.
Newly appointed directors will then be sent a notice by Companies House stating that they have been registered as a director of the relevant company and setting out information about the role and duties of a director. If an appointee has not consented to act, they may apply to be removed from the record.
Exclusion of dates of birth:
The Act enables the omission of the day of birth from a director’s date of birth on the public record, however companies will still be required to send full information on each director to Companies House and make it available for inspection in the company’s own register of directors.
Accelerated striking off:
Companies House will be able to strike a company from the record within approximately four months, as opposed to the current time scale of six months. The voluntary strike off process will take two months following notice being issued in the Gazette instead of three months.
Provisions likely to come into force in January 2016
From what is expected to be January 2016, all companies (except those to which certain disclosure rules apply) will be required to keep a public register of people with “significant control” over them (a “PSC Register”), in addition to the other registers they are required to keep. This requirement will not apply to LLPs and the requirement to file this information with Companies House is not likely to take effect until April 2016.
For further information on this topic, keep a look out for our article on PSC registers which is to follow shortly.
4. Provisions likely to come into force in April 2016 and thereafter
Statement of capital and confirmation replacing Annual Return:
Companies will no longer be required to include the amount paid up and unpaid on each share in statements of capital (for example, in form SH01). They will instead only need to give details of the aggregate amount unpaid on the total number of shares.
Companies will also no longer be required to file Annual Returns. Instead they will need to file an annual statement confirming that the company has delivered all information to Companies House that it is required to provide during the relevant period. Companies will at the same time be required to send details of any changes to the information in its PSC Register (if they are required to keep a PSC Register) if they have not elected to keep this centrally at Companies House.
Option to keep registers on central Companies House register:
The Act provides the ability to keep a company’s registers (including any PSC Register) centrally on public record with Companies House instead of separately, but only if the company elects to do so and all shareholders have agreed to such election. This ability applies to the registers of members, directors, directors’ residential addresses and secretaries. However it seems that a company will still need to keep separately the other registers it is obliged to keep, such as the registers of mortgages and debentures, and will be able to exclude certain information from the public record.
Disqualification of directors:
Amendments to the Company Directors Disqualification Act 1986 permit the secretary of state to apply to court to have a director disqualified on the grounds that he has been convicted of certain offences overseas. Such offences include offences in connection with the promotion, formation, management, liquidation or striking off of a company.
Duty to publish payment practices and policies information:
The secretary of state has been given the power to impose an obligation to publish information on a company’s payment practices and policies. This power has recently been the subject of a consultation and is likely to only apply to large private companies, large quoted companies and LLPs.