The Small Business, Enterprise and Employment Act 2015 (SBEEA 2015) met with Royal Assent earlier this year and the changes it introduces are being implemented in phases. Schools which are structured as charitable companies, or which operate trading subsidiary companies, should take note of what they will need to do differently going forwards.
Among the provisions already in force are those which clarify that shadow directors* are subject to the same company law duties as directors, and provisions which shorten the strike-off period for companies whose directors have applied for the company to be struck off the company register voluntarily, from 3 months to 2 months.
Register of persons with significant control
The next key change for companies to note is the new requirement to keep a register of persons with significant control (PSCs). This requirement will apply from April 2016, and companies will be obliged to start filing this information at Companies House from 30 June 2016.
The PSC register is intended to promote greater transparency around company ownership and control, part of the Government’s aim to ensure the UK is recognised as an open and trusted forum for business, deterring the use of companies to facilitate the conduct of illicit activities. While this might not seem to be relevant to independent schools, broadly speaking all companies other than listed companies are caught by the new legislation. There is still scope for the Department of Business, Innovation and Skills (BIS) to make regulations to take other companies outside the scope of the legislation, but it is highly unlikely there will be a blanket exception for all charitable companies, and schools should take steps now to prepare for the PSC register introduction.
In short, the PSC register is a register of all individuals who meet the definition of a “PSC”. A PSC is someone who:
- Holds more than 25% of shares in the company, directly or indirectly;
- Holds more than 25% of voting rights in the company, directly or indirectly;
- Holds the right to appoint or remove a majority of the directors of the company;
- Exercises or holds the right to exercise “significant influence or control”**; or
- Is a trustee or member of a trust or firm which meets any of the conditions in 1-4 above.
Companies will be required to take reasonable steps to find out if there are any, and then identify, PSCs. They must notify PSCs of their status on becoming or ceasing to be a PSC.
Registrable PSC information for individuals includes their name, address for service, nationality, date of birth and usual residential address. The usual residential address regime for directors will apply to PSCs, such that addresses will not be publicly disclosed except to specified public authorities. PSCs’ dates of birth will also be protected on the public PSC register insofar as only the month and year of birth will be visible.
The SBEEA 2015 also requires “relevant legal entities” to be included on the PSC register, but these provisions are unlikely to affect independent schools.
Companies House will maintain a public PSC register. Private companies can opt whether to maintain their own separate PSC register at their registered office or simply to hold all the relevant information on the Companies House register.
June 2016 is set to see the end of the requirement on companies to file an annual return at Companies House. Instead, companies will need to provide a confirmation statement (via a “Check and Confirm” system), confirming that all required information has been provided over the previous year (e.g. details of change to registered office and updates to company registers).
Directors’ disqualification regime
Changes to the directors’ disqualification regime are also due to be introduced in June 2016. A company director may be disqualified if convicted of certain offences overseas, and a court will be able to take into account a wider range of factors in determining whether a director should be disqualified.
Ban on corporate directors
From October 2016, there will be a ban on appointing new corporate directors. Most directors of charitable companies are individuals anyway, but there are some situations when charitable companies or their trading subsidiaries may have considered it appropriate to appoint a corporate director. There will be a 12-month transition period for replacing existing corporate directors, after which their appointment will also become ineffective.
Once again, there is scope for BIS to exclude certain types of company from this ban via separate regulations. However, it is unlikely there will be a complete exception for charities. If there is an exception, it would likely be restricted to, for example, charities appointing a charity or public body as a corporate director, or charities of a certain size.
*A shadow director is a person in accordance with whose directions or instructions the directors of a company are accustomed to act.
**The SBEEA 2015 requires BIS to publish statutory guidelines on the meaning of this phrase. The guidelines were expected in October 2015 but had not been published at the time of writing.