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Law for Business

Knowhow - guidance - precedents

06 SEP 2013

Did you know … that some overseas companies are required to make trading disclosures under UK law?

Part 7 of the Overseas Companies Regulations 2009 sets out a trading disclosures regime for overseas companies.  The rules are very similar to those which apply to UK companies, but present a slightly different set of challenges as far as compliance is concerned.

Rationale

The rationale for the requirement that companies disclose certain corporate details at their premises and on their letters, emails and websites is that third parties dealing with companies should know with whom they are doing business.  Armed with the company's name and number, they can, for example, obtain its latest accounts from Companies House and make an informed assessment of its financial health.

Plainly, this rationale applies whether the companies with whom third parties are doing business are incorporated in the UK or overseas, so it makes perfect sense for the domestic rules, contained in the Companies (Trading Disclosures) Regulations 2008, to be supplemented by a similar set of rules applicable to overseas companies.

Compliance

The rules in Part 7 of the Overseas Companies Regulations 2009 require the overseas company's name to be displayed at certain locations, and for its name and other corporate details to be included on certain documents (whether in hard copy or in electronic form) and on its websites.

Anyone who has grappled with the UK regime will be aware that the rules are not always as easy to comply with as they may sound.  Part 7, too, contains a number of potential difficulties.  For example:

  • it will not always be clear whether the rules apply to a particular overseas company - some of the disclosure requirements apply to an overseas company with a UK establishment (ie a UK branch or a UK place of business), whilst others apply to an overseas company that "carries on business" in the UK. Although the question as to whether an overseas company has a UK establishment may itself be difficult to answer, that question will have to be addressed in any case, when deciding whether the company is required to register particulars in the UK. The question as to whether the company is carrying on business in the UK will require separate consideration, and unfortunately it is not entirely clear when, as a matter of law, a company can be said to be carrying on business in this country
  •  the obligation to disclose arises mainly in relation to locations, documents and websites which relate to the overseas company's business activities in the UK, and it may be difficult in some cases to determine whether, say, a particular website is being used in connection with its UK activities - take the case of a Canadian multinational which operates a global website as well as websites designed for specific jurisdictions. Whilst the website aimed at the UK would clearly be required to contain the necessary information, it might be less clear on the facts whether the details would also have to be included on the company's global website.

Comment

A failure to comply with the disclosure requirements "without reasonable excuse" constitutes an offence on the part of the company and every officer in default.

The important words here are, of course, "without reasonable excuse".  Notwithstanding the grey areas which are built into Part 7, an overseas company which does its best to make sense of its obligations is unlikely to run into any problems with the authorities.

The key is to be aware that Part 7 exists in the first place!

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