Last year the Government sought views on improving transparency and accountability in the corporate world. One proposal in the interests of transparency was to ban the use of a corporate director – a director being a company rather than an individual. In the pensions field many independent trustees provide their services via a company and so the law in this area is of particular interest to independent pension trustees.
Government's response April 2014
As reported in our May update the Government published its response to comments on its July 2013 consultation earlier this year and recently introduced the Small Business, Enterprise and Employment Bill into Parliament (the Bill). The Bill contains a general prohibition of corporate directors and gives the Business Secretary the power to provide for exceptions to this prohibition through secondary legislation. The Bill is expected to be discussed in the House of Commons in the autumn and pass into the House of Lords towards the end of the year.
Once the Bill comes into force UK companies will no longer be able to have a 'corporate director' on their board of directors and instead directors must be individuals and not legal entities such as a company. However the Government recognises that in certain specific business areas corporate directors provide particular benefits. Therefore there will be a limited number of exemptions to the prohibition.
The exceptions will be where there are high standards of governance or high levels of regulatory oversight. The present list of proposed exemptions is:
- group structures including large listed companies or large private companies; and
Disappointingly, the exemption list does not at the moment include pension schemes. However all may not be lost. There is a footnote in the Government's response mentioning that the Government is also considering exemptions in relation to different classes of legal entities. It is unclear whether this relates just to different types of charity structures or may embrace other organisations such as pension fund trustee boards.
Independent pension trustees supplying their trustee services through companies have time to lobby Government – although the Bill has been published, the regulations governing the exceptions to the general prohibition of corporate directors have yet to appear.