The department for Business, Innovation and Skills (BIS) recently published the government's response to its October 2013 consultation on a package of deregulatory proposals which evolved from comments received as a result of the Company and Commercial law Red Tape Challenge. This was an initiative where the government sought feedback as to how the regulatory landscape for companies could be improved and slimmed down, with a lighter touch being introduced where appropriate.
The proposals in the October consultation looked at four areas:
- annual filings ie the annual return and accounts
- transparency around company registers, directors' dates of birth, statements of capital and disclosure of subsidiaries
- communications - the use of email and information on the public register at Companies House
- resolving problems about registered office addresses, directors' disputes and striking off.
The proposed reforms detailed below, though separate, link in with those suggested in the response to the Transparency and Trust Discussion paper (see previous article). The government's intention is that the two set of proposals together will help reduce duplication and complexity for businesses and improve the UK business environment generally.
Companies will no longer have to complete an annual return on a set date each year. Instead companies will be required to 'check, notify changes if necessary and confirm' the statutory information held at Companies House at least once in every 12 month period.
The intention here is that if a company has to notify a change, for example, a change of director, it will then have the opportunity to check and confirm its other information at the same time. If the company does this, it will not be required to do anything else for a twelve month period. This will stop the situation where a company has to notify a change and then repeat that information at the time the annual return is due. An annual fee will still need to be paid and companies that wish to retain a fixed return date will be able to do so.
The new proposals will also simplify a private company's obligations in relation to its legal shareholders. The current obligation is to provide a full list of shareholders at least every three years. Under the new system, unless there has been a change, there will be no need to resubmit shareholder information.
The government will also be making changes to the joint filing tool used to ensure that small companies can provide data just once to HMRC and Companies House. The October consultation paper mooted the possibility of mandating a single date for filing accounts with HMRC and Companies House but this is not being taken forward.
Transparency – Registers
Private companies will have the option of not keeping any, or all, of the following registers: register of directors; directors' residential addresses; secretaries; members; and the register of beneficial ownership. If this option is taken up the company will need to ensure that the information on the public register at Companies House is up-to date. This will include information which would be on the company register but not the public register (such as residential addresses of members) and information available on the company register which is on the public register but not available for public inspection (directors' full dates of birth). Information that is not available on either the company register or the public register (directors' residential addresses) will not be made publicly available.
If a company opts out of keeping a register of members, a person will become a member of a company when their name appears on the public register along with their residential address information. A unanimous decision by members will be required as a safeguard before this option can be exercised.
Transparency – directors' dates of birth
To reduce the risk of identity fraud, full details of a director's date of birth will no longer be available on the public register – instead only the month and year will be shown. Full dates of birth will still be available through a company's own register of directors. If private companies elect not to keep their own registers (see above) full dates of birth of directors will be included on the public register.
Transparency – statements of capital
The requirement for a company's statement of capital to list the amount unpaid and paid up on a share will be removed. Companies will be required only to list the aggregate amount unpaid. A private company reregistering as a public company will be required to state the aggregate amount paid up on its shares. An updated statement of capital will still be required following an allotment of shares.
Transparency – disclosure of subsidiaries
Details of subsidiaries will be required to be listed in the accounts. Formal proposals to deal with this will form part of the EU Accounting Directive.
The government will make it possible for Companies House to widen its use of electronic communications. It will be able to send all correspondence and statutory notices electronically. Companies will be able to opt in to receiving notices electronically though this will not be mandatory. Companies will be allowed to make additional information available on the public register, for example a trading address, should they wish to do so.
If, having received a complaint, the Registrar of Companies feels the company does not have a demonstrable link to its registered office, it will be able to remove that address from the public register and replace it with an alternative address.
The procedure to strike off and dissolve a company from the public register will be overhauled to enable this to happen more quickly. For a voluntary striking off the period will be reduced from 3-4 months to approximately 2 months and for compulsory striking off, from 5-6 months to around 3 ½months.
The requirement for a company to file a 'consent to act' for newly appointed directors and company secretaries will be removed. Instead a company will be required to make a statement of truth that the person has consented. The Registrar of Companies will then write to directors and provide details of their duties as directors. Recipients of the letters will be able to object to their names being on the public register as a director if they assert they are not a director of that company.
These changes will be implemented through changes to the Companies Act 2006, and this will be done as soon as Parliamentary time allows. Primary legislation is needed for most of the changes although the proposals on disclosure of subsidiaries and company email addresses will be made through secondary legislation.
To see a copy of the government response paper please click here.