The Small Business, Enterprise and Employment Act 2015 (the "2015 Act") received Royal Assent on 26 March 2015, and its provisions are being brought into force in a staged implementation over the next year. The Act will introduce some important changes to UK company law, aimed at increasing transparency of UK companies, particularly in relation to ownership and control. This article sets out some of the key changes and dates UK companies should be aware of.
Register of Persons with Significant Control
Perhaps the most controversial change introduced by the 2015 Act is the requirement for UK companies to keep a statutory register of any persons with significant control ("PSC") over the company. This is scheduled to come into force in April 2016, with a requirement to file details of PSCs annually to Companies House coming into force on 30 June 2016.
The aim of this provision is to increase transparency around who ultimately owns and controls UK companies. By introducing this change the government is seeking to deter, identify and sanction those who hide their interest in UK companies in order to facilitate illegal activities. It is also hoped that increased transparency will promote good corporate behaviour.
Guidance as to the meaning of "significant control" has been laid before Parliament, but in broad terms, the persons required to be included on the register will be those controlling more than 25% of a company's shares or voting rights, and persons with the ability to exercise significant influence or control over the company.
The register will also include details of legal entities which would meet the test for a PSC if it were an individual, known as relevant legal entities ("RLE").
We will be issuing a follow up article with a more detailed analysis of what is meant by a person with significant control.
Abolition of Corporate Directors
A further change aimed at increasing transparency and accountability, is the requirement that all directors of UK companies must be natural persons, thereby essentially prohibiting corporate directors. There will be limited exemptions to the requirement, which have still to be confirmed by the Secretary of State. The prohibition on corporate directors was originally scheduled to come into force in October 2015, however this has been delayed to October 2016. Once the provision is in effect, companies will have a 12 month period in which to remove corporate directors, following which any remaining corporate directors, who are not subject to an exemption, will automatically cease to be directors.
Implementation dates of other key changes
26 May 2015
- The statutory duties of directors now apply to shadow directors.
- Bearer shares (shares where the share certificate is proof of ownership, rather than entry in the register of members) were abolished. Companies were given a nine month period in which to convert or cancel all existing bearer shares.
10 October 2015
- A director's date of birth will no longer appear on the public register.
- Companies applying for voluntary strike off can be struck off the register two months after publication of notice in the Gazette, reduced from three months.
- Rather than the person appointed to act as a director or secretary confirming their consent to act as such, companies will confirm that the person has consented to act. Notice of their appointment will be sent to the person, and a simplified removal procedure came into force in December 2015 for those who notify the Registrar that they did not in fact consent. It remains prudent for companies to obtain a written consent to act from directors in advance of their appointment.
If all members consent, private companies will be able to keep information on the public register at Companies House rather than maintaining statutory registers at their registered office.
As of June 2016, annual returns will be replaced by "confirmation statements", which confirm that all necessary filings have been made to Companies House and will detail any changes which have occurred during the confirmation period which have not otherwise been filed, (e.g. changes to the identity of the company's shareholders).
Whilst there are a number of new provisions for companies to consider, it is hoped that the staged implementation of the Act will allow for a smooth transition to an ultimately more transparent framework. Please get in touch with your Shepherd and Wedderburn contact should you require further details about what is required by your company under the new legislation.