Proposed changes to company law
A number of changes to company law are proposed in the Small Business, Enterprise and Employment Bill which is currently making its way through Parliament. Some are intended to increase transparency and trust in the UK business environment as part of the global agenda to tackle issues such as tax evasion, money laundering and terrorist financing. Others are measures to simplify company filing requirements in response to the Government's Red Tape Challenge.
The changes range from minor administrative matters to some that will have significant implications for many companies. The Bill is expected to pass into law in spring 2015, but it will be brought into force in stages. The anticipated implementation dates for company law changes are as follows.
Around May 2015 (two months after the Bill is passed) [Update June 2015: this came into force on 26 May 2015]
Abolition of bearer shares
At present, it is possible for a company to issue bearer shares. 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. Around 1,220 UK companies currently have bearer shares in issue.
The issue of new bearer shares will be prohibited, and holders of existing bearer shares will have nine months in which to surrender them to the company for conversion into registered shares. Within one month of these provisions entering into force, and again before the final month of the nine month surrender window, the company will have to give notice to holders of bearer shares of their conversion rights. The notice must be made available on the company's website (if they have one) and published in the Gazette. If any bearer shares are not surrendered for conversion, the company will be required to apply to court to cancel them.
Companies which make provision for bearer shares in their articles will be able to remove these provisions without the shareholders passing a special resolution. A copy of the amended articles would have to be filed at Companies House.
Restrictions on having corporate directors [Update June 2015: Government has announced that this is now intended to come into force in April 2016]
Companies are currently permitted to appoint another company to be a director, provided that they have at least one director who is an individual.
Unless an exemption applies, companies will no longer be permitted to appoint corporate directors and any corporate director still in office one year later will automatically cease to be a director.
Proposed exemptions (which have been subject to a recent consultation include directors of:
- quoted companies, including AIM companies, and (possibly) other public companies;
- large private companies (but possibly only those within group structures);
- subsidiaries of the above types of company, where another group company is appointed as director;
- some charitable companies; and
- corporate trustees of pension funds.
When the appointment of a new director is registered by a company, Companies House will contact the person concerned to notify them that they have been entered on the public register as a director and directing them to information about their duties.
If the person has not, in fact, consented to act as a director of that company, they will be able to apply for the removal of the appointment from the register.
Although companies will still have to provide a director's date of birth to Companies House, only the month and year (not the day) will be available to those searching the public register. This is intended to help reduce the risk of identity theft.
Registered office disputes
The Registrar of Companies will be given power to change a company's registered office on receipt of a complaint that the company is not authorised to use that address.
Faster strike off procedures
Companies House will be able to strike unresponsive companies off the register more quickly, and the process for voluntary striking off will also be speeded up.
Companies (other than quoted companies subject to the significant shareholder regime under the Disclosure and Transparency Rules or equivalent disclosure requirements) will be required to identify individuals who have ultimate ownership of more than 25% of their shares or voting rights, or the right to appoint or remove a majority of the board, or who exercise significant influence or control over the company (persons with significant control or PSC). They will have three months in which to put together their own PSC register before the requirement to submit this information to Companies House takes effect in April 2016.
The Department for Business, Innovation and Skills has recently published its response to its consultation on the guidance required to help companies understand the new requirements, the way a PSC’s control should be recorded on the PSC register and the protection of some PSC information from public disclosure.
Register of persons with significant control
Companies will be required to file PSC information at Companies House. As with directors, only the month and year of a PSC's date of birth will be generally available to the public.
Private companies may decide to keep certain registers (including the register of members, register of directors and their residential addresses and the new PSC register) on the public record at Companies House, rather than keeping them at their registered office or other place where they can be inspected.
Annual return replaced by "check and confirm"
Annual returns will be replaced by a requirement for companies to check and confirm to Companies House, at least once a year, that they have delivered all the required information.
Statement of capital
Certain Companies House forms include a statement of capital, requiring companies to include figures for the amount paid or unpaid on each share. This has caused problems for companies with a complex share capital history. The requirement will be simplified to require disclosure of the aggregate amount unpaid on the company's share capital.
A wider range of matters will be taken into account in determining whether a director should be disqualified, including the director's track record, the impact of his behaviour on others and overseas convictions and misconduct.
The time limit for bringing disqualification proceedings will be increased from two to three years and co-operation between the Insolvency Service and sectoral regulators will be improved.
Insolvency practitioners will be able to assign claims against directors to creditors and the court will be able to make compensation orders where creditors have suffered identifiable losses.