The Small Business, Enterprise and Employment Act 2015, which came in to force earlier this year, made a number of company law changes, some of which are highlighted below. The main motivation behind some of the corporate changes is to make it easier to ascertain who owns and runs a company.
The new act has a phased implementation referred to below.
Prohibition on the use of Corporate Directors
In October 2015, a new section (156A) will be inserted into the Companies Act 2006 prohibiting the use of corporate directors. No UK company will be allowed to appoint a corporate director as a result.
All existing corporate directors will cease to be directors within one year of this provision coming into force. The Department for Business, Innovation & Skills is consulting on exceptions to this ban, such as where a company may appoint a corporate director if all of the directors of the corporate director are natural persons and certain details of those directors are available on a publicly maintained register.
An individual director appointed in place of a corporate director should consider officers’ insurance as company directors by their nature have limited liability whereas individuals do not.
Register of persons with significant control
In January 2016, companies will be required to keep a persons with significant control (PSC) register. However, the obligation to file this information at Companies House will not take effect until three months later.
The PSC register is in addition to the register of members (which records who owns the legal title to a company’s shares).
A person has significant control if they directly or indirectly (such as via a chain of companies)
- hold more than 25% of the shares or voting rights in a company
- hold the right to appoint/remove a majority of the board, or
- exercise significant influence or control over a company.
Criminal penalties can be imposed on companies or individuals for failing to adhere to the new rules or for providing false information.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.