Our series of SBEEA Alerts will tackle the various corporate aspects, broadly following the order of their implementation. Note that the dates from Phase 2 onwards are still provisional.
To read the Government's provisional implementation timetable click here. (note that the restrictions on corporate directors is to be delayed until October 2016)
Implementation timetable and the topics we will cover: 26 May 2015 – Phase 1
From 26 May 2015 (being two months after Royal Assent) companies will no longer be able to issue share warrants to bearer (also know as 'bearer shares'). For those companies that have bearer shares in issue, their holders will have nine months to surrender such bearer shares in exchange for registered shares. Those that are not surrendered will need to be cancelled by the company that issued them.
The general duties of directors set out in the Companies Act 2006 (which are based on common law rules and equitable principles) currently only apply to shadow directors in the same way as the corresponding common law rules and equitable principles can. The Companies Act 2006 is changing to provide that such general duties of directors apply to shadow directors unless they are not capable of applying. The Secretary of State is being granted the power to make regulations concerning the application or disapplication of general duties of directors to shadow directors (with or without modification) so that they are more accessible and comprehensive than they are now. The aim is to improve standards of shadow director conduct and increase accountability where standards are not met.
The definition of 'shadow director' in the Companies Act 2006, the Insolvency Act 1986 and the Company Directors Disqualification Act 1986 is also changing slightly so as to bring further clarity to those to whom the definition applies. Currently the definition provides that a person is not to be regarded as a shadow director by reason only that the directors act on advice given by him/her in a professional capacity. This is to be extended to clarify that advice, guidance, directions or instructions given in exercise of a function conferred by or under legislation is not sufficient to satisfy the definition of shadow director, nor is any advice or guidance etc issued by a Minister of the Crown.
October 2015 – Phase 2
Directors' date of birth
There will no longer be a requirement to include the day of a director's date of birth on a company's public register of directors, although companies will still be required to send these details to the registrar. The month and year will still be available for inspection on the public register.
Consent to act as director or secretary
The current requirement that a director or secretary provide formal 'consent to act' by signing a paper form or via personal authentication on electronic filings is to be replaced. For newly appointed directors and secretaries, Companies House will add a statement to the relevant appointment and incorporation forms that the person has consented to act. Companies will then be required to agree to this statement, As part of this, Companies House will write to all newly appointed directors to make them aware that their appointment has been filed on the public register and explain their general statutory duties.
It will become quicker to arrange for a company to be struck off the register.
December 2015 - Phase 3
Director disputes It will become easier to get falsely or incorrectly appointed directors’ details removed from the register (i.e. those that did not consent to be appointed). Registered office disputes A new process will be introduced to provide a remedy where a company is using an address for its registered office but is not authorised to do so.
January 2016 – Phase 4
Persons with significant control (PSC) - maintenance of register
Companies (and, as announced in June 2015, LLP's) will be required to keep a register of persons with significant control (‘PSC register’) from January 2016. This is in preparation for the need to file this information at Companies House from April 2016.
The Government is setting up a working group to help draft the statutory and non-statutory guidance required to support the implementation of the PSC register regime and, in particular, what is meant by the expression “significant influence or control”.
April 2016 – Phase 5
Check and confirm
The requirement to file an annual return with full company details will be abolished. It will be replaced with a 'check and confirm' process. From April 2016 onwards, companies will file, at least once every 12 months, a confirmation statement detailing only any changes that have occurred since the last confirmation statement.
Persons with significant control (PSC) - publication on central register
A company's ‘PSC register’ must be made publically available from April 2016 onwards. For new companies this will need to be filed at Companies House on incorporation. For existing companies this obligation will take effect from April 2016. Any updates to PSC registers will then need to be made via the new ‘check and confirm’ process.
Private company registers may be kept at Companies House Private companies will (with shareholder approval) be able to opt to keep certain information on the central public register at Companies House, instead of needing to maintain their own separate statutory registers (such as registers of members, directors, secretaries, directors’ residential addresses and the new PSC register).
The regime relating to the disqualification of directors will be updated and strengthened.
Statement of capital
Statements of capital will be simplified and made consistent throughout the Companies Act 2006.
October 2016 - Phase 6
Currently, whilst a UK company must have at least one natural person as a director it can also appoint corporate bodies as directors. From April 2016 there will be a prohibition on appointing corporate directors. There will be some limited exceptions; these are currently the subject of a Government consultation process. Existing corporate directors will automatically cease to be directors a year and a day after the provisions come into force. Companies with any existing corporate directors in the group should start to consider the action they will take when this provision comes into force. We still await the detail as to whether companies will need to explain how they meet the conditions for an exception (once finalised) or whether such exceptions will apply automatically.
Following the Government's consultation on whether there should be exceptions to the proposed ban on corporate directors (the responses to which reinforced to BIS that using a corporate director can have significant benefits), BIS are seeking views on whether the Secretary of State should make a principles based exception. The current proposal from BIS is that a company may only appoint a corporate director if all of the directors of the corporate director are natural persons and the law under which the corporate director is established requires certain details of the directors of the corporate director to be included in a public register. If the outcome of the consultation is such that the exception is formulated so that only UK companies may act as a corporate director, this second test would not apply.
Next Alert Our next SBEEA Alert will look in more detail at the abolition of bearer shares.