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Law for Business

Knowhow - guidance - precedents

18 SEP 2015

The Small Business, Enterprise and Employment Act - Company Law Aspects

The Small Business, Enterprise and Employment Act - Company Law Aspects
Introduction

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.

2June 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.

Article continues below...

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Part 8 (Company Filing Requirements)

  • Companies to confirm that their basic company information is correct and complete at any point in the year. The new proposal is a 'check and confirm' of the company's status. Companies will have to provide a confirmation statement and notify Companies House of any changes. This will come into force in June 2016.
  • Allow companies to opt out of the requirement to keep certain company registers and, instead, keep the information on the public register. This will come into force in June 2016.
  • Make filing requirements simpler where directors are appointed. This removes the requirements for consent to act signatures/provision of security information to provide the same. Instead, it relies on the company retaining the relevant information that the director consents. It has been suggested that this system could be open to abuse where there are internal disputes within a company. This will be implemented from 1 October 2015. For newly appointed directors or secretaries a statement will be added to the forms filed at Companies House (whether via paper or online) to indicate that the person being appointed has consented to act. Companies House will also write to newly appointed directors. This will make them aware of their appointment and it is intended that this will also explain their general duties. Companies House has also announced that the day in the date of birth for directors will also be suppressed from 1 October 2015.
  • New directors' disputes procedures will be introduced and also procedures to make it simpler to remove inaccurate registered office addresses from the public register. These two changes will be implemented from December 2015. There are also new measures to tackle control of company directors to make evidence of shadow directorship easier to provide. It is anticipated that this will be introduced from June 2016. The measures here are aimed at tackling the problem of 'front' or 'nominee directors'. The Companies Act 2006 makes clear that a director cannot absolve himself of his responsibilities. However, the problem of persons controlling directors in this way still persists.
  • Reduce the strike off period for a company down from approximately six months to three months. This is coming into force from 1 October 2015.
Part 9 (Director Disqualification Regime) (Part 9, Clauses 92-104) and in Part 10 (Insolvency)

  • to bolster the matters that a court must take into account when determining unfitness of a director;
  • measures to enable disqualification proceedings to be brought in the UK against persons convicted of company-related offences abroad;
  • a new provision allowing a compensation order to be made against a disqualified director (to increase the level of compensation for creditors);
  • allowing insolvency practitioners ('IPs') to assign certain legal actions to third parties (eg creditors) that currently only IPs can pursue;
  • aligning bankruptcy restrictions; and
  • measures allowing the Insolvency Service:
    • to act on a wider range of information from other regulators; and
    • to increase the time limit for the Insolvency Service to take action against a director.
These will be brought in from June 2016.
From June 2016 the statement of capital will also be made simpler and more consistent.

From June 2016/early 17 companies may provide additional information (as they wish) to Companies House.

Finally...

Whilst it is the PSC changes that have received the most publicity, it can be seen from the above that there are changes occurring over the next two years that will affect almost all companies and those charged with their governance and administration. In a separate article the PSC register will be considered in more detail.
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