The introduction of the Small Business, Enterprise and Employment Act 2015 (“the Act”) has resulted in some important changes to corporate governance that all UK directors should be aware of.
The Act was introduced by the Government to enhance transparency of company ownership and control structures and to give clarity on the legal and beneficial ownership of businesses registered in the UK. The Act received Royal Assent on 26 March 2015 but the key changes are only now coming into effect with the remaining provisions due to be implemented in stages throughout 2016. Despite its title, the changes introduced by the Act will apply to all unlisted UK companies, not just small businesses.
Summary of key changes
Filing requirements and registers
From June 2016, there will no longer be a requirement for a company to file an annual return at Companies House. Instead, companies will be required to provide a ‘confirmation statement’ at least once every 12 months stating that it has provided all the information it was required to provide during the relevant 12 month period.
The Act will also introduce an option for companies to elect to keep the information that would usually be recorded in their statutory registers on a central public register maintained by Companies House.
Persons with significant control
With effect from 6 April 2016, companies and LLPs are now required to maintain a register of persons with significant control (“PSC Register”). The PSC Register must contain details of any individual or entity that holds (directly or indirectly) more than 25% of the shares or voting rights in a company or otherwise exercises control over the company or its management.
To comply with the requirement, companies must take reasonable steps to identify persons who have significant control over the company and this will include considering all documents and information already available to it.
From June 2016, the Act will introduce a further requirement for companies to file the details of all persons with significant control at Companies House and this information will be available for public inspection.
Failure to comply with the requirements under the Act is a criminal offence and could lead to fines for the company and/or its directors or even imprisonment for the directors.
From October 2016, companies will be prohibited from appointing corporate directors (subject to limited exceptions) and may only appoint natural persons. Any existing corporate directors will cease to be directors 12 months after the ban takes effect. Companies should begin to prepare by identifying any corporate directors in their group and start considering appropriate replacements.
Other key changes include:
- An extension of directors’ duties to shadow directors
- Abolition of the use of bearer shares
- The period for striking off a company by way of voluntary strike-off has been shortened from three to two months
This article covers some of the changes brought about by the Act but for further details please contact our Corporate Services Team on 0808 175 5292.