The Small Business, Enterprise and Employment Act 2015 ("the Act") has introduced some changes in the area of corporate administration and further changes are pending.
Abolition of corporate directors
Expected implementation date: October 2015
All directors will need to be natural persons. Companies and other corporate bodies (e.g. LLPs) will be prohibited from acting as or being appointed as company directors or directors of LLPs. This change is aimed at limiting the possibilities of using corporate structures for hiding illegal activities. Once the Act has been implemented, companies and LLPs will have a one-year transitional period to appoint replacement directors. This may be subject to some exemptions and exceptions, pending the outcome of a consultation.
- We recommend early planning to ascertain which group companies have corporate directors on their boards, whether alternative arrangements need to be made and, if so, who is likely to be the best natural person to replace the outgoing corporate.
- In each case it will be necessary to review the relevant company's articles of association (and any applicable shareholder agreement) to ascertain any relevant timetable or other procedural requirements for appointing and/or removing directors, including Companies House filings.
Abolition of annual returns
Expected implementation date: April 2016
Annual returns are to be replaced with an annual “confirmation statement”. Once the relevant provisions have been implemented it will be possible for companies to confirm and update, as necessary, similar information that is currently set out in their annual returns at any time in a 12 month period – rather than only on the relevant annual return date. This should make it easier for companies to align the timing of filing of their confirmation statements with their annual accounts.
Option to keep part of corporate Statutory Books at Companies House
Expected implementation date: April 2016
Companies, with shareholder approval, will be able to keep their registers of persons with significant control (as to which, see below), directors, secretaries and members at Companies House instead of their registered office. This means that companies can stop maintaining, in part, their own set of registers. However, the obligation to collate and update the information will remain with the relevant companies, rather than the Registrar and companies will be responsible for sending the required information to Companies House in order to enable Companies House to maintain the necessary records.
Companies will also be required to keep a full hard copy of their registers for the time covering the period before electing Companies House to keep their records.
It is important to note that where a company elects to keep either its register of directors or register of persons with significant control at Companies House, the proposals suggest that the usual residential addresses of such individuals named therein will be shown on the public register and will not be supressed. Electing to use an alternative service address will no longer keep a director's usual residential address out of the public domain, representing a move away from the status quo.
- No action needs to be taken now.
- Our current view is that companies that choose to keep control of their register of members will be better placed to ensure that updates are carried out quickly and accurately. This is important as until a person’s name is entered into the register of members by the Registrar at Companies House, they will not become a shareholder.
- Companies may consider that since they are still required to keep some registers at the registered office, keeping others at Companies House offers limited benefit.
New register of “persons with significant control”
Expected implementation date: January 2016
All unquoted UK companies will have to keep a register of individuals that have “significant control”. This will apply to those individual or corporate shareholders who own or control more than 25% of a UK company’s shares or voting rights or who exercise significant influence or control over the company or its management.
UK listed companies are broadly exempt.
The information will have to be provided to Companies House where it will be publicly available.
Failure of the person with significant control to provide information will allow companies concerned to impose sanctions such as loss of voting rights and transfer restrictions, without having to apply to court. Failure to comply with the provisions of the Act may lead to the directors, secretaries and persons with significant control being convicted of a criminal offence.
Companies will be required to provide a statement of initial significant control to be included with the documents delivered to Companies House when making an application to register a company.
- Companies and their shareholders should consider if they have or may themselves be a “person with significant control” (applying the provisions of the Act that are in final form – noting that there is further secondary legislation expected).
If you would like further information or specific advice please contact:
Robert Rice, Partner, Corporate Group, 0118 952 7263, [email protected]
This bulletin is intended to provide general information about some recent and anticipated developments which may be of interest. It is not intended to be comprehensive, nor provide specific legal advice and should not be acted or relied upon in doing so. It is strongly recommended that professional advice is sought prior to taking any action in relation to matters referred to in this publication.
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.