New laws enacted but yet to be fully implemented will materially reform UK company law. The Small Business, Enterprise and Employment Act 2015 ("SBEE") will introduce various reforms aimed at making companies more transparent and directors and persons in control more accountable than ever before. It is also hoped that the changes will help to deter criminal misuse of companies in the UK. Full details can be found on the Government website dedicated to the SBEE Act.
Briefly the key changes to be aware of include:
abolition of bearer shares; new register of "persons with significant control" (the PSC register); abolition of corporate directors; new reporting of company payment practices and policies; confirmation that shadow directors are bound by the same duties as appointed directors; accelerated strike off procedure; abolition of annual returns; new option to keep company statutory books at the central registry; disqualification of directors; and changes to information filed at Companies House.
Some of the more radical/pertinent changes are examined in more detail below.
Abolition of Bearer Shares
Bearer shares are shares that have been issued but there is no owner of them. As the title suggests such shares have been abolished. Because the holders of bearer shares are not necessarily known to the companies that have them in issue they are seen as an easy means of facilitating illicit activity such as tax evasion or money laundering.
As of 26 May 2015 no new bearer shares could be issued and existing bearer shares are required to be either to converted into non-bearer shares or cancelled within a fairly short timescale following a prescribed procedure. Any bearer share remaining by 26 December 2015 can no longer be transferred and has no rights attaching to it.
Companies which still have bearer shares on 26 February 2016 will be required to apply to court to cancel them and to pay into court an amount equal to the nominal value of the shares within 14 days of cancellation together with any suspended distributions to ensure that all bearer shares are eliminated.
Failure by a company to follow the prescribed procedure for dealing with bearer shares is an offence and a company with outstanding bearer shares will not be able to be struck off.
The SBEE requires details of individuals who own or control more than 25% of a UK company's shares or voting rights, or who otherwise exercise significant influence or control over the company or its management, to be included on a private and a public register. The public register will be available online and searchable by individual name, as well as by company name.
The majority of UK companies, even those with simple shareholding structures, will need to comply with the provisions. Only UK listed companies are broadly exempt as they are already subject to similar disclosure provisions.
Companies will be required to start keeping a register from January 2016 and from April 2016 PSC information will also need to be included in companies' annual confirmation statements (currently known as annual returns - for more information see below).
Failure to comply risks the company being convicted of a criminal offence. Likewise all shareholders will need to provide the required information to the company or risk being convicted of a criminal offence. Readers should note that there is no defence for an inadvertent or slight breach of the provisions.
What must be Recorded on the Register?
The Government recently consulted on the form which some of the details must take - see this page for further details and here. See also for additional background information the paper The Register of People with Significant Control - Understanding the new requirements, recording control on the PSC register and protecting people at serious risk of harm.
The register must be kept available for inspection alongside the company's other registers i.e. at the company's registered office or its alternative nominated inspection location. This requirement will however be subject to the option that companies will have from April, to elect to maintain certain registers at Companies House. In addition to keeping a "private" PSC register the information must also be filed with Companies House annually as part of the new annual confirmation statement (formerly the Annual Return).
The company's PSC register must be open to inspection free of charge and the company must provide copies on payment of a modest fee. The Government is currently consulting on these charges and advocates a flat fee of £12 for inspection but provides a sliding scale option for consultation of up to £91.
The person wishing to inspect or obtain copies of the register must provide their name and address and the purpose for which the information is to be used. Within 5 days the company must either comply with a request or apply to court. If the court is satisfied that the inspection or copy is not for a proper purpose it must direct the company not to comply with the request.
Abolition of Corporate Directors
SBEE will require all directors to be natural persons (since 2008 at least one director has had to be a natural person) subject to certain potential exceptions which have yet to be confirmed. Existing directors who are not natural persons will automatically cease to be directors 12 months after the provision is in force.
Abolition of Annual Returns
Companies will no longer be required to submit an "annual return" however the need to submit similar type information i.e. a snapshot of shareholders, officers and capital on a given date each year will be required. Companies will need to confirm (or update where necessary) similar information at any time during a 12 month period. This slightly more relaxed approach to the annual return will be the principle method of conveying who is on the PSC register.
Option to keep Statutory Books at the Companies House
Companies will be able to stop maintaining, in part, their own sets of company books and instead will be able to elect to keep their registers of PSCs, members, directors and secretaries at Companies House. Companies must retain the hard copy books covering the period before they elected to keep their records at Companies House. Bearing in mind the requirement to keep other statutory records, companies may feel that there is limited point in using this facility.
If you require any further information or advice in respect of any of matters discussed above please do not hesitate to contact us on 0191 281 4000 or firstname.lastname@example.org: Companies, Legal News, News