Important changes for all UK Companies

Having received Royal Assent on the 26^th March 2015, The Small Business, Enterprise and Employment Act 2015 (“Act”) makes significant changes to UK company law, impacting companies of all sizes.

In this article, we identify the key changes and set out a timetable for their implementation. It should be noted that these dates are subject to change and we will be keeping an eye on developments and providing further updates to this article and the timetable.

The two main reasons for these changes are:

(1) To increase the transparency of who has control over UK companies; and

(2) To reduce red tape for businesses.

The key changes are as follows:

PSC Register and Confirmation Statements

The main change to be implemented by the Act, which is due to take effect from April 2016, is the requirement for private limited companies to keep a new Register of People with Significant Control (the “PSC Register”).

Whilst full detailed guidance is due to be released in the autumn, it is known that the register should include details of the following individuals:

• direct or indirect ownership of more than 25% of the shares in the company;
• direct or indirect control of more than 25% of the voting rights in the company;
• direct or indirect right to appoint or remove a majority of the directors of the company;
• the exercise or right to exercise significant influence over the company; or
• the exercise or right to exercise significant influence or control over the activities of a trust or form which itself meets one or more of the first four conditions.

As of June 2016, private limited companies will also need to notify any changes to the PSC Register at least annually to Companies House as part of the new annual confirmation process.

The rationale behind this change is to make it easier to submit this annual information on a ‘check and confirm’ basis; as opposed to resubmitting the same information, in the majority of cases, each year, which will replace the existing annual returns process.

The main requirements in relation to the PSC register are:

• a  company will be required to hold and keep available for inspection a PSC register;
• the information on the PSC register (which must include details of the individual’s name, date of birth, nationality, address and details of their interest in the company) must be filed at Companies House;
• companies will be required to take reasonable steps to identify people they know or suspect to have significant control; and
• all information will be publicly accessible with the exception of residential addresses and dates of birth.

For many companies this will be a straightforward list of directors and major shareholders but the position will be more complex for companies where non-shareholders exercise control such as investor representative, or family member, or where companies have overseas shareholders or are owned by trusts.

Corporate Directors

The Act will implement the abolition of corporate directors with limited exceptions, which is expected to take effect in October 2016. The intention is for all directors of a company to be natural persons. For companies with existing corporate directors, there will be a ‘grace period’ of one year from implementation to change any existing corporate directors, following which any remaining corporate directors will be deemed to cease being a director. We recommend that companies review their existing directors to establish if there are any corporate directors that will be affected by the changes. In addition, companies should think carefully before appointing any new corporate directors given that the changes will shortly be implemented.

Company Books

From June 2016, private limited companies, with the approval of their shareholders, may opt to have certain statutory register information held at Companies House that the company can maintain via a central system, rather than keep them at the registered office. These registers are the lists of members, directors, secretaries and the PSC Register. There have been concerns of potential time delays in submitting any changes to the registers to Companies House, however further guidance shall be provided in due course.

Appointment of a Director/ Secretary

The current position when notifying Companies House of a director’s or secretary’s appointment is that the Companies House application form must include the consent of that person to act as director or secretary in the form of a signature or a digital authentication. The new proposals will simplify the procedure for notifying Companies House of the director and secretary appointments by removing the requirement for the form itself to contain the consent, and instead requiring the company to make a statement confirming that consent to act has been given.

Bearer Shares

A change that was implemented on 26^th May 2015 was the abolition of bearer shares. Bearer shares are those that have been issued but are not registered to a specific holder in the company’s share register. From the 26^th May 2015, no further bearer shares are to be issued, and existing bearer shares have a ‘grace period’ of nine months, to be converted into registered shares, or for a company to apply to court for cancellation of any outstanding bearer shares. We recommend that if companies have not checked their records already, they should do so, and if there are any outstanding bearer shares companies should take advice and to plan how these should be dealt with.

Company Registration Process

The SBEEA 2015 also requires that the Secretary of State ensures that there is a streamlined company registration system in place, no later than 31^st May 2017. The government’s intention in relation to this requirement is to alleviate the viewed ‘fragmented’ process of incorporating and registering a UK company. The aim is to establish a ‘one click registration’ system that enables the supply of information to only be entered once to both Companies House and HM Revenue & Customs.

Timetable

In summary a timetable for the changes and action required under the Act is as follows (please note the future implementation dates are only anticipated dates and are subject to change):

Contact

If you require advice on corporate governance or wish for further guidance on the changes coming in under the Act we would be delighted to assist you.