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I’m often tasked by commercial customers of the firm to explain how the complexities of UK company law impact upon their business and its corporate governance. Seemingly contradictory rulings and arcane legislature can end up distracting them from their day job and you need a real knack for seeing every regulation as an opportunity to help your business succeed.
The Small Business, Enterprise and Employment Act 2015 (SBEE) has recently been introduced in an effort to demystify the requirements of running a small business in the UK. The Act is based on the Government’s ‘Transparency and Trust’ theme which underpins much of the returning Conservative party’s trade and business policy and seeks to clarify the regulations in an effort to make life simpler for businesses operating in the UK whilst also deterring corporate fraud. The Act has made a large number of changes to existing regulation, key among which centre on corporate governance and secretarial duties.
Firstly, onerous Annual Returns have been replaced with less administrative ‘confirmation statements’. The idea behind this change is that confirmation statements will make it easier to complete statements of capital as the format is similar to that of the company’s annual accounts. This change is due to come into force in April 2016.
Another change which seemingly relieves a burdensome secretarial function is the removal of the requirement to keep your own company registers on site. If you’re operating a private limited company, you will be allowed to keep your statutory registers at Companies House allowing ease of access and updating. You will also, however, have to maintain a list of Persons with Significant Control (PSC) in addition to the formally named Directors of the company. However, this may actually only be useful for small companies whose information changes only occasionally or where there are limited confidentiality concerns as statutory registers will still have to be maintained and you will still have to update Companies House with any changes. This is also due to be effective from April 2016.
Staying with the concept of Persons with Significant Control, the Act makes it compulsory for companies whose shares have previously been traded, but are now no longer listed (‘unquoted companies’) to keep a public register of people with significant control of the company. This change has a proposed date of January 2016 and, from April 2016, details of such people must be submitted annually to Companies House. Someone defined as having ‘significant control’ controls over 25% of the company’s shares or voting rights, or has the power to appoint or remove the majority of the board. There are strict penalties for non-disclosure of PSCs, for the PSC themselves and other directors of the company.
Other changes to secretarial tasks include non-disclosure of the full date of birth for new directors by Companies House, in an effort to improve data protection and shield directors from fraud. Unfortunately for existing directors, however, there is no requirement for Companies House to withhold the same information if the name has already been registered meaning that their details will be freely available. One last change to the act of registering a director makes it simpler for the director themselves. Instead of directors counter-signing a Companies House form to confirm their consent, Companies House will notify directors of their registration and the director may object to such appointment. This is expected to be implemented from October 2015.
A number of measures have been introduced with the aim of increasing transparency and trust amongst businesses and the public. Corporate Directors, that is, those directors which are corporate entities and not a ‘natural person’ will be forbidden from October this year. There is a fear that Corporate Directorships are used to cover up illegal activity, however the Government does recognise that this method is used in genuine situations and is currently defining the conditions which satisfy the exceptions to this rule. There will be a 12 month transitional period for current corporate directors to be removed and executive directors appointed in their place.
In addition, ‘bearer shares’ (where ownership of the share is not registered, recorded, nor tracked if transferred to another, and the only proof of ownership required is a certificate, upon the presentation of which, dividends are paid to the ‘bearer’) are to be banned from 26 May 2015. There will be a nine month transitional period for existing holders of bearer shares to swap their shares and be recorded on the shareholder register.
The SBEE also affects other aspects of corporate governance, chief among which include changes to shadow directors’ duties whose obligations have now been extended to mirror those of executive directors, although it remains to be seen how this will be implemented. And finally, the new rules allow dormant companies to be struck off in a shorter period of time than was allowed before the enactment of the new legislation. This is expected to come into force in October 2015.
In conclusion, the Act appears to be a good attempt at making the business of business simpler and more transparent, but it does also raise questions around its implementation.
In the fast-paced world of business, windows of opportunity do not stay open for long. Our Company Commercial lawyers have a close eye for detail, acumen which means they see the full picture, and they’ll share your drive to get your business moving in the right direction. To find out how the new legislation affects your business, or for any commercial matter which requires guidance or legal advice, contact me on 01788 557602 or at email@example.com