Small Business, Enterprise and Employment Bill: The Effects on Companies
The Small Business, Enterprise and Employment Bill (the Bill) is currently making its way through Parliament, bringing with it a number of important changes to company law. The intention of some of these changes is increased transparency, whilst other changes simplify company filing requirements. The Bill is expected to pass into law in early 2015, but it will come into force in stages.
Below are a list of key changes which company directors and company secretaries should be aware of.
"Persons with Significant Control" Register
Every private and public company incorporated in the UK (with very limited exceptions) will be required to maintain and keep open for public inspection a new company register, a register of persons having significant control of the company. This new "PSC Register" will contain information on individuals who ultimately own or control more than 25% of a company’s shares or voting rights, or who otherwise exercise control over the company and its management. This includes jointly held interests and control via a trust or fund. This information will also need to be filed at Companies House once a year.
Every company will have duties to take reasonable steps to investigate and obtain information each person whom they know or suspect to be a person with significant control ("PSC") , to keep that information up to date and to confirm that such information is up to date at least every 12 months. This includes an obligation to serve notices on anyone who may know anything about who might be a PSC.
There are also duties on each PSC to advise relevant companies that it is a PSC and to supply information to the company. There is a right for companies to impose restrictions on shares without a court order where a PSC has failed to comply with its disclosure obligations.
A PSC's name, service address, country of residence, nationality, date of birth, usual residential address, the date on which they became registrable on the PSC Register, and the nature of his or her control over the company will be contained in the PSC Register, which must be made available for inspection at its registered office. A person requesting to inspect the register must give the reason for that request, and a company will be able to apply to court to deny the request if, in essence, the request is not for a proper purpose (this replicates the existing regime governing access to the shareholder register).
It will be possible to make an application to Companies House to stop beneficial ownership information being publicly disclosed in exceptional circumstances. This is likely to be in line with the existing regime for addresses not to be disclosed where there is a serious risk of violence or intimidation.
Abolition of Bearer Shares
Bearer shares are a type of freely transferable security with which participation in a company can only be demonstrated by possession of the share certificate. Details of the holders of bearer shares are not entered in the company's register of members, and the shares are transferred by delivery of a warrant representing the shares. These are seldom used, except by a number of small companies but were historically used for structuring and tax planning.
The Bill prohibits the creation of new bearer shares and permits companies to amend their articles of association to remove provisions authorising the issue of bearer shares without obtaining consent by way of a special resolution. The Bill also sets out transitional arrangements for the mandatory cancellation or conversion of existing bearer shares. The directors of relevant companies should discuss the surrender and conversion of bearer shares as soon as possible as the Bill requires detailed procedures to be followed within a given timetable from the date on which the legislation comes into force.
The Bill amends the existing legislation and, from will require all company directors to be natural persons. From the date on which the legislation comes into force, the appointment of corporate directors will be prohibited. Companies with existing corporate directorships will be given a one year grace period in which to resign corporate directors and (where appropriate) appoint natural directors. Any corporate directorships remaining after the expiry of this one year period will automatically terminate.
The Bill amends existing legislation to provide that the general duties of directors apply to shadow directors where and to the extent they are capable of applying.
The Bill removes the requirement on companies to file an annual return. Instead, all companies will be subject to a new requirement to deliver to Companies House a confirmation statement stating that the company has delivered all the information it was required to provide in relation to any changes in the period to which the confirmation statement relates. The confirmation statement must be provided within 14 days of the end of the relevant review period.
When providing a confirmation statement, the company must also provide notice of any change in the company's principal business activities and, if it has a share capital, a statement of capital (unless there has been no change since the last statement of capital was delivered to Companies House).
Option to Use Central Register
Private companies will have the option of keeping the information that must be recorded in certain statutory registers on the public register maintained by Companies House only, thereby dispensing with the requirement to keep and maintain those registers separately. The relevant registers include registers of members, registers of directors (and residential addresses) and registers of secretaries. Equivalent provisions will apply in relation to the PSC Register.
For more information please contact Gareth Walls, Partner, Employment & Benefits (NI).
Date published: 23 February 2015