The Act introduces a ban on corporates acting as directors of UK companies. Originally intended for implementation in October 2015, the introduction of this element has now been postponed till October 2016.

The rationale for the ban is perceived transparency and accountability issues with the use of corporate directors.  However, they are quite often used legitimately, in particular within group structures. The Government has acknowledged that using corporate directors can lower administrative burdens for companies in some circumstances, eg allowing more flexibility about who signs documents or attends meetings and reducing the number of changes of director which need to be made and registered.

There will be exceptions from the ban, although the scope of these will be set out in regulations which have yet to be published. The Government consultation has indicated that exceptions (for situations where the Government believes there is less of a transparency issue) may include:

  • Use of corporate directors by groups whose parent is listed on a regulated market.

  • Appointments of corporate directors whose own directors are all natural persons and either the director company is a UK company or the law of the jurisdiction in which it is established requires certain details of the directors to be included in a publicly accessible register.

These exceptions are likely to enable many UK-based groups to continue to use corporate directors. Although implementation is still some way off and the precise scope of the exceptions is not yet known, companies using corporate directors should consider whether they are likely be able to benefit from the anticipated exceptions and, if not, what steps they should take to prepare.