Significant changes to company law in the UK, Small Business, Enterprise and Employment Act 2015
The government’s aim in introducing the Act is to enable small businesses to innovate, grow and compete. The hope is also that internationally it will endorse the UK as a trusted and fair place to do business.
The Act received Royal Assent on 26 March 2015 and is set to have a significant impact on UK company law. The Act is to be implemented in phases and it is anticipated it will be fully in force by April 2016.
This article summarises the key corporate aspects of the Act and looks at what companies should be doing as a result of its enactment.
At some point in 2016 (date for implementation to be announced shortly), the Act will require all company directors to be natural persons. Any appointment made in contravention of this provision will be void and it will be a criminal offence to breach it. Some exceptions may apply where the existence of corporate directors represents a low risk to corporate transparency and is of high value to the running of the company. The government is analysing the feedback from a consultation on the scope of exceptions to the prohibition.
The legislation does provide for a transition period; any remaining corporate directors will cease to be directors one year after the provision comes into force rather than immediately. Companies should begin to identify their corporate directors and consider which natural persons would be suitable replacements.
The PSC Register
This provision of the Act is aimed at enhancing transparency surrounding company ownership. The Act will require companies to maintain a register of people with “significant control” over the company and ensure the register is kept up to date. The register will be open to public inspection. However, anyone requesting sight of the register will have to state the purpose for which the information will be used. Failure to maintain the register will be a criminal offence, not only on the part of the company but also on the part of every officer of the company who is in default. Private companies will be able to maintain this register at Companies House, rather than keeping it available for inspection at their offices, if they wish.
A ‘person with significant control’ (“PSC”) over a company is an individual who ultimately owns or controls more than 25% of a company’s shares or voting rights, or who otherwise exercises significant influence or control over a company or its management.
Further guidance on whether an individual is a PSC is due to be published by the Secretary of State in October 2015 ahead of an estimated implementation date of January 2016. However, companies and their shareholders would be sensible to start considering now whether, under the provisions of the Act, they believe they have, or are, an individual who exercises “significant control”.
The Act amends company filing requirements. The requirement to file an annual return is removed and is replaced by a duty to deliver a “confirmation statement” at least once each year. The company will have to confirm that it has delivered all the information required to be delivered to Companies House in the period to which the statement relates. This will give companies increased flexibility to confirm whether their basic company information is correct and complete at any point in a year. This provision is likely to come into force in April 2016.
Option to Use Central Register
The Act gives companies the option of keeping the information recorded on their register of members, directors and secretaries on a public register maintained by the Registrar of Companies. If they do so, they will no longer be required to maintain those registers separately. The implementation date for this provision is due to be April 2016.
Should you require any further information or assistance in connection with the Act or the steps you should be taking to ensure compliance with it, please contact Jessica Nugent (email@example.com) or Edward Hoare (firstname.lastname@example.org) or your usual Goodman Derrick contact.
This article was written by Jessica Nugent, with assistance from trainee solicitor Freya Marks. It is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.