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A reprieve for corporate directors?

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Japan, United Kingdom

The Government is rowing back from its initial proposals for a blanket ban on corporate directors. The Department for Business, Innovation and Skills is now proposing a wider exception.

The Government is rowing back from its initial proposals for a blanket ban on corporate directors.  In addition to the narrow specific exceptions originally envisaged, the Department for Business, Innovation and Skills is now proposing a wider exception.

The Government was surprised by the responses to its discussion paper on this topic, which it says "opened our eyes to practical uses of corporate directors that we hadn’t fully appreciated before".  In addition to larger and quoted companies and their subsidiaries, some charitable companies and corporate trustees of pension funds, which were covered by the original exception proposals, the following areas were identified where an exception would be helpful:

  • corporate service providers
  • Lloyds of London members
  • non-executive directors
  • property management companies
  • special purpose vehicles
  • life assurance companies
  • minority investments in start-up companies

In addition, the Government now acknowledges that using a corporate director can have significant benefits.  One of these is reduced administration costs - one large company estimated that the use of corporate directors saves it £1.1m per annum.  In addition, a corporate director can provide different experts to the board to fit the agenda of the meeting and also ensure that there is a readily available signatory for key documentation.

The Government is therefore now consulting on a proposal that any UK company may appoint a corporate director, as long as both of the following conditions are satisfied:

  • all of the directors (or equivalent officers) of the corporate director entity are individuals
  • the law under which the corporate director entity is established requires certain details of its directors to be included in a publicly maintained accessible register

The proposed exception may be narrowed so that only a corporate entity registered in the UK can be appointed as a corporate director.

Jonathan Brooks is a Partner in Fieldfisher's Corporate Group in London.

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