The Small Business, Enterprise and Employment Act 2015 (the Act) seeks to achieve transparency of ownership and control through a new requirement that all companies incorporated in the UK (other than publicly traded companies) and LLPs maintain a register of those people who have significant control over them. This is scheduled to come into force in April 2016 and we await secondary legislation and guidance on its exact requirements.
The Act also however makes changes aimed to simplify and reduce the cost of UK company (and LLP) law compliance. The government hopes that these changes will ensure that the UK continues to be a leading country for overseas investors and will allow companies and LLPs to focus on developing their businesses rather than spending time dealing with company law requirements.
So what are these changes and what does this mean for your business?
The overall period to effect a company strike off has been reduced.
With effect from 26 May 2015 the Act clarifies what we would expect in terms of shadow directors; that they are subject to the general duties which apply to directors.
The Act has introduced new provisions to the Company Directors Disqualification Act 1986. These allow the Secretary of State to apply to the court for the disqualification of a director where that individual has been convicted of certain offences overseas. These include disqualification on the grounds that he:
The period of time in which an application can be made for directors to be disqualified relating to an insolvent company has been extended from two to three years.
The creation of bearer shares by a company is now prohibited (effective as of 26 May 2015). Existing bearer shares must either be cancelled or surrendered for conversion into registered shares. The Act sets out detailed transitional arrangements including a timeline, which must be complied with in relation to such surrender/conversion.
There is now no longer a requirement to provide Companies House with a written "consent to act" from a newly appointed director or secretary. The company will instead have to provide a statement that the appointee has consented. Companies House will send a notice to any newly appointed director as soon as reasonably practicable after the appointment has been registered.
Scheduled to come into force in December 2015 is a new application process to remove names from the register of directors where consent was not provided.
In practice, to avoid any suggestion that an appointee has not consented, companies should continue to ask them to consent in writing beforehand.
The Act also introduces a new process (again scheduled for December 2015) for rectifying the register where the registered office address is in dispute.
With the aim of minimising identity theft and fraud, the Act enables Companies House to omit the day (but not the month or year) of the date of birth of company directors and PSCs from the information available for public inspection. There are certain exceptions to this and companies must still send full date of birth information to Companies House.
The Act requires that, by 26 March 2016, regulations are made requiring certain businesses to publish information showing any differences in the pay of their male and female employees. It is expected to apply to businesses with 250 or more employees.
It is proposed that large private companies, large LLPs and large quoted companies will be required to publish information about their payment practices and policies. They will also need to publish details of their performance by reference to those practices and policies.
We understand that this is to take effect from April 2016 and is to capture payments in respect of business to business contracts. The Department for Business, Innovation and Skills (BIS) has confirmed that affected companies will be required to report twice yearly and publish their reports on their company website.
A company will no longer have a duty to deliver an annual return to Companies House. Instead it must file a confirmation statement, which confirms that it has delivered all information required in the period to which that statement relates. This includes information about the company's registered office, principal business activities, directors, company secretaries, "people with significant control" and where a company keeps its registers (if not at its registered office).
A confirmation statement must be filed every 12 months but can be provided more frequently at the election of the company.
A statement of capital will no longer need to state the amount paid up and unpaid on each share. Instead, companies will be required to specify the aggregate amount unpaid on the total number of shares.
Private companies will have the option of maintaining their register of members, directors, secretaries, directors' residential addresses and PSCs at Companies House rather than their registered office. This should remove an element of duplication of filing for companies which make such an election.
All company directors will be required to be individuals and the appointment of corporate directors will be prohibited. This is subject to exceptions approved by the Secretary of State, although a company must still have at least one director who is an individual.
BIS has issued a consultation paper and questionnaire asking for views on whether there should be any prescribed exceptions. Its proposal is that a company may appoint a corporate director if:
It does not appear that there will be an exception for corporate directors used in the context of corporate groups where parent companies frequently appoint a nominee to the boards of their subsidiaries.
Additionally, it is not clear if an exception will be agreed for companies with shares admitted to trading on a regulated market.
Any corporate directors still appointed after one year of the new legislation coming into force will automatically cease to be directors, unless an exception applies.
If you would like detailed advice on the Act as it applies to your company or LLP, please do get in touch with your usual contact at TLT or contact Alice Gardner on +44 (0)333 006 0341 or alice.gardner@TLTsolicitors.com
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at October 2015. Specific advice should be sought for specific cases. For more information see our terms & conditions on www.TLTsolicitors.com