THE SMALL BUSINESS, ENTERPRISE AND EMPLOYMENT ACT 2015 (THE “ACT”)
The Act makes important changes to the law applying to UK companies and aims to deter illegal activity such as money laundering and tax evasion. Designed to improve transparency and trust around who owns and controls UK businesses, the Act aims to deter and sanction those who hide their interests. It will also simplify company filing requirements, reducing duplication and improving flexibility in dealings with Companies House.
SUMMARY OF KEY COMPANY LAW CHANGES AND DATES
People with Significant Control
UK companies will be required to maintain a register of persons with significant control (“PSCs”). This will be separate to the register of members, which currently records the company’s shareholders.
The aim is to ensure that individuals with significant beneficial interests, or other controlling rights in a company, are easily identifiable. A PSC is a person who:
- Holds more than 25% of the company’s shares.
- Holds more than 25% of the company’s voting rights.
- Has the right to appoint or remove a majority of the board of directors.
- Has significant influence or control over the company.
- Has significant influence or control over a trust or partnership.
The government has issued guidance on the meaning of ‘significant influence or control’.
UK companies will have the responsibility of identifying PSCs and keeping an up-to-date PSC register at its registered office. PSCs will also be obliged to notify companies of their identities and relevant interest in the company. Annually submitted to Companies House, the PSC Register is to be accessible by the public (see ‘Annual Returns’).
Both companies and individuals will be subject to criminal penalties for failing to provide, or deliberately providing false, information. A company can also impose sanctions if its PSCs do not comply with their disclosure obligations.
The requirement to keep a PSC register came into force on 6 April 2016. Unquoted companies have been under such obligations since January 2016.
Companies’ annual returns will no longer need filling.
Instead, there will be a requirement to ‘check and confirm’ the company information by filing a ‘confirmation statement’ and notifying Companies House of any changes if necessary at least once every 12 months.
The confirmation statement is due within 14 days of the end of the relevant review period i.e. the period of 12 months beginning on the day of the company’s incorporation and each period of 12 months beginning the day after the end of the previous review period (the due date).
Subject to this requirement, the company can choose to provide a confirmation statement at any point prior to the due date, in which case the next 12-month period will run from the day after the confirmation date (being the date specified in the confirmation statement).
PSC information must be submitted on the ‘confirmation statement’ similar to providing director’s details.
These changes and the requirement to send PSC information to Companies House are due to come into force in June 2016
Ban on Corporate Directors
It will not be possible for UK Companies to appoint companies and other corporate entities as directors, i.e. all directors must be natural persons. The aim is to restrict the use of corporate structures to hide illegal activity.
Companies affected have a one-year transitional period to appoint replacement directors and existing corporate directors will automatically cease to be directors one year after this prohibition has come into effect.
The company will need to make the necessary PSC register alterations and notifications at Companies House.
Having said that, following a public consultation undertaken by the Department for Business, Innovation and Skills in April 2016, the government is considering exceptions to this proposed rule.
Indeed, the government has recognised that a company may appoint corporate directors for legitimate reasons and are considering the introduction of certain exceptions to the general ban. An exception that has been considered is that corporate directors will be allowed where the following two conditions are met:
- All directors of the corporate director are individuals.
- The law (if not UK law) under which the corporate director is appointed requires details of the individual officer of the corporate director to be accessible through a public register.
These provisions are due to come into force in October 2016
Companies will deliver certain categories of optional information to Companies House.A consultation period will establish the types of information Companies House can hold. These might include:
- Company trading addresses.
- Number of employees.
- An email address.
- A phone number.
The criteria are yet to be decided, but any optional information sent to Companies House will be on a voluntary basis.
These changes are due to come into force late 2016/early 2017