The Small Business Enterprise and Employment Act 2015 will have a real effect on the way Property Developers, Construction Businesses and Investors administer their companies.
Three key provisions for property companies to be aware of:
- No More Corporate Directors
From October 2016, all directors will have to be natural persons.
Property companies will be prohibited from appointing new corporate directors and by October any existing corporate directors must be removed.
Corporate directors may need to be replaced with natural persons.
Pitfalls which could be overlooked include minimum director requirements in articles of association.
Practical Advice: Plan ahead. Check your property company’s articles of association and compile lists of any corporate directors. Consider replacing these corporate directors with individuals.
- No More Annual Returns
From June 2016 companies will no longer have to submit an annual return to Companies House.
In its place, companies need to deliver a confirmation statement at least annually, stating that the company has delivered all the required information in the last 12 months.
Practical Advice: Don’t get caught out. The new confirmation can be submitted at any time in the 12 month review period and a new review period of 12 months will be set from the date of the last confirmation statement. So, stay ahead of the game, ensuring all information is kept up to date at Companies House including, for example, changes to registered offices and registration of any charges.
- Requirement to Register People with Significant Control
From April 2016 companies must maintain a register of people with significant control (“PSC”s) over the company and from June 2016 must make it public.
The information on the PSC register has to be given to Companies House, updated annually and will be publicly available and searchable by individual name and by a company name.
An individual with significant control will meet at least one of the following five conditions:
1. directly or indirectly hold more than 25% of the nominal share capital or
2. directly or indirectly control more than 25% of the votes at general meetings or
3. directly or indirectly be able to control the appointment or removal of a majority of the board or
4. actually exercise, or have the right to exercise, significant influence or control over the company or
5. actually exercise or have the right to exercise significant influence or control over any trust or firm (which is not a legal entity) which has significant control (under one of the four conditions above) over the company
If it is a legal entity rather than a person who meets the conditions, they are known as a relevant legal entity or “RLE”.
Once on the register, the PSC/RLE has an obligation to provide certain information to the company.
Anyone who wishes to inspect or obtain a copy of a PSC register has to give to the company their name, address and the purpose for which the information will be used. Within five days of the request the company must either comply with it or apply to the court.
This requirement will also apply to LLPs, with a different set of 5 conditions to be met for an individual to be recognised as having significant control.
This is likely to add to the administrative burden for many involved in the development industry, particularly where developers enter into corporate joint ventures with landowners, funders or other developers to promote and secure the development of land.
Practical Advice: Take steps to identify PSC’s as soon as practicable. Take note of the key dates, and don’t fall foul of deadlines. Companies that fail to take the necessary steps to identify relevant shareholders and officers in default may be guilty of criminal offence.
For more detailed advice please contact Robert Rice, Partner on [email protected].
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.