18 SEP 2015
The Small Business, Enterprise and Employment Act - Company Law Aspects
The Small Business, Enterprise and Employment Act ('SBEEA') received the Royal Assent on 26 March 2015. This article looks at what is covered in the legislation for company law. Despite the reference to 'small' in its name, most businesses will experience changes to their procedures as a result. The measures are intended to increase trust in British business or to simplify filing requirements. In the initial Discussion Paper1 Dr Vince Cable MP referred to:
'a range of proposals to enhance the transparency of UK company ownership and increase trust in UK business. The proposals will help prevent illegal activity such as money laundering and tax evasion. They will give investors and others the tools to hold companies to account. They will provide businesses, investors, employees and consumers with confidence that companies are acting fairly - and that those who deliberately or recklessly break the rules will be punished.'
He added that in line with the Prime Minister, David Cameron's, commitment made at the earlier G8 summit2 the proposals would 'shine a light on who owns what' in British companies.3 'Who owns what' has become the register of people with significant control (over a company) (the 'PSC register'). BIS has maintained an open and productive dialogue with those working in this area. In that connection, the writer has represented the views of the Company Law Committee of the Law Society (England and Wales).4
Company Law Provisions in the SBEEA
The legislation covers more than the PSC register and more than company law matters. Implementation of the provisions is staggered with the most onerous being implemented in the later stages. The company law provisions (and their anticipated implementation dates) are:
Part 7 (Companies: Transparency)
- The introduction of the PSC register. The timetable for this is April 2016 for companies to keep this register. Companies will then need to file the relevant information at Companies House from 30 June 2016.
- The prohibition of bearer shares (referred to as share warrants to bearer). This has already come into force on 26 May 2015. It has been anticipated for some time as their use in many overseas jurisdictions has either been prohibited or subject to restrictions. Any existing share warrants to bearer will need to be surrendered within 9 months.
- Prohibition on the use of corporate directors. By their nature the use of corporate directors means that it is not clear who are the individuals/natural persons managing a company. The government has consulted on areas where corporate directors may be allowed to continue. This will come into effect in October 2016. Any company with an existing corporate director will need to take action either to explain how they meet the conditions for an exception or give notice to the Registrar at the corporate director has ceased to act.5
1 Discussion Paper on Transparency and Trust in 2013 – see https://www.gov.uk/government/uploads/system/uplo... This consultation ran from July 2013 to September 2013.
3As referred to in the Discussion paper.
4The writer represented the Law Society giving evidence to the Parliamentary Public Bill Committee on 14 October 2014, please see www.publications.parliament.uk/pa/cm201415/cmpubl...
5For example, in relation to OEIC UCITS fund structures the Financial Conduct Authority requires the use of corporate directors. In addition, corporate directors can be very useful in logistic terms. By their nature they can easily allow for changes in personnel or accommodate problems of signing and executing documents/contracts without the reliance on a particular individual being available at a particular location.
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