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Upcoming changes to Company Law
- AuthorMichael Williams
The Small Business, Enterprise and Employment Act 2015 was passed earlier this year and introduces some significant changes to company law in England and Wales. Some parts of the Act have already been brought into force and further provisions are due to come into force in 2016.
Some of the key changes to be introduced by the Act are designed to make the ownership and control of companies clearer to the outside world and radically alter the rules governing the provision of information in respect of company ownership.
Amongst the changes already introduced and to be introduced over the coming months are:
1. The PSC Register
The Act requires companies to keep a register of persons having ‘significant control’ over the company (known as the ‘PSC Register’).
In brief, a person is deemed to have significant control where:
• They hold 25% or more of the companies’ shares; or
• They have the right to appoint a majority of the directors of the company; or
• They hold 25% or more of the voting rights in the company; or
• They hold ‘significant influence’ or ‘control’ over the company.
It follows that virtually all companies in England and Wales will need to maintain a PSC Register. Failure to keep the register (as with other statutory registers) is a criminal offence.
Clearly this is likely to have an impact where nominee or corporate shareholders are used at present for the purposes of maintaining privacy; individuals using these arrangements will need to review whether they can continue to effectively do so.
The obligation to keep the register will come into force in April 2016 and the obligation to provide Companies House with information comprised in the register comes into force in June 2016. The rules will eventually be extended to LLPs.
2. Registerable persons and information requirements
In addition to the requirement to maintain the PSC register:
• Companies must investigate and obtain information on ‘registerable persons’; and
• Individuals must supply information to companies and also to take active steps to identify themselves to companies where they may be a ‘registerable person’.
All individuals with significant control and relevant legal entities are registerable persons unless they fall within the definition of non-registerable.
Companies and individuals who fail to comply with the information obligations commit an offence and can be compelled to provide information by court.
Company owners and those with a stake in companies need to start taking steps now to identify whether they are going to fall within the new information requirements.
3. A ban on ‘corporate directors’
The Act introduces (with some exceptions) a ban on corporate directors and requires all company directors to be ‘natural persons’ i.e. human beings!
If a corporate entity is appointed as a director in breach of the ban the appointment will be void. It will also be a criminal offence to breach the ban.
This provision has already been implemented but is subject to a 12 month period of grace expiring in October 2016, after which time any existing corporate director appointments will cease to be effective.
Companies need to consider whether they will have to take steps to appoint or remove directors to comply with the new requirements.
4. Directors’ disqualification
The Act changes the existing directors’ disqualification regime and widens the factors that the courts may take into account when considering a director’s fitness (or unfitness) to act. There are many factors that the court will consider when making a decision.
Further powers are also introduced under the Act to make financial awards against disqualified directors where the conduct for which they have been disqualified has caused loss to creditors of an insolvent company.
5. Duties of ‘shadow directors’
The Act introduces confirmation that the statutory duties applicable to company directors also apply to shadow directors where they are capable of applying. There has been judicial debate in the past as to whether shadow directors are indeed subject to the same duty as ‘ordinary’ directors but the Act lays this point to rest.
6. Information supplied to Companies House
The requirement to file an annual return is to be abolished. In its place companies will be required to deliver a statement confirming that it has delivered to Companies House all the information it ought to have provided to Companies House in the preceding 12 months.
Further changes are also being introduced to the information that has to be provided to Companies House in respect of a company’s share capital.
In addition, as of April 2016 companies will have the option of simply filing information at Companies House instead of maintaining their existing statutory registers.
7. Company Strike Off
An expedited procedure is introduced under the Act which should decrease the timescales for striking off companies where they are no longer required.
How to comply with the changes
Given the vast changes that the Act introduces, it is imperative that companies strive to comply with the new laws as failure to do so may result in criminal proceedings being brought against you.
For further information and to ensure compliance, contact us today.
Free legal workshops will be held by JCP Solicitors on this subject in early 2016. To register your interest in attending an event on Swansea, Carmarthen or Haverfordwest please email firstname.lastname@example.org