All companies should be aware of the following significant changes to company law – the removal of each of corporate directors, bearer shares and annual returns and a new requirement to keep a register of “persons with significant control”.
The Small Business, Enterprise and Employment Bill is rattling through Parliament at speed. It has passed through the Commons and needs now only to complete the report stage and its third reading in the Lords before it can receive Royal Asset. We assume that that will happen before 30 March 2015 when Parliament will dissolve in preparation for the general election.
The news, which affects all companies, is that Annual Returns will be abolished, with effect from April 2016. They will be replaced by an annual statement to Companies House confirming that the company has delivered all the information it was required to provide in the period to which the confirmation statement relates (in most cases, the 12 month period currently covered by the annual return process). We will be in touch with all our company secretarial clients to help prepare for these changes.
Helpfully, the new law will allow private companies the option of keeping at Companies House the information that currently must be recorded in statutory registers, thereby dispensing with the requirement to keep and maintain those registers or “company books” separately.
BIS is still consulting regarding the abolition of corporate directors. Currently, companies may have a corporate entity (such as another company or an LLP) as directors (provided they are not the only director).The intention is that corporate directors will be abolished for most normal companies.
This will have a big impact on dormant companies, wholly owned subsidiaries and other group companies and companies used by trusts. Much preparation will be needed, particularly if the prohibition takes effect, as currently proposed, in October 2015.
The Bill will also introduce a Register of People with Significant Control (“PSC Register”).
The new law will require all companies to keep a register of those with significant control over the company. This will be available for inspection at the registered office (but, again and helpfully, private companies will have the option of keeping PSC information on the public register at Companies House instead).
A person with significant control is defined as an individual who (either alone or as one of a number of joint holders of the share(s) or right(s) in question) holds, directly or indirectly:
- more than 25% of the shares in the company (or a right to share in more than 25% of the entity’s capital or profit);
- more than 25% of the voting rights in the company;
- the right to appoint or remove a majority of the board of directors of the company;
- the right to exercise significant influence or control over the company;
An expert working panel is working on what “significant influence or control” means – but it is clear that this legislation will require companies to disclose:
- who ultimately owns and controls companies;
- trust, nominee or other arrangements which currently are not public or, in some instances, are not even known to all the other shareholders or directors, let alone HMRC; and
- certain rights set out in shareholders’ and other agreements which, again, may have been intended to be private and may not be known to all the shareholders or directors.
The requirement for companies to keep a PSC Register is likely come into force in January 2016.
Bearer shares (sometimes known as share warrants) are not common in the UK but are used to conceal the identities of share holders. They are, in effect, certificates proving ownership of the shares in question with no underlying register disclosing who owns the shares. A prohibition on issuing new bearer shares will come into force two months after Royal Assent. By the end of nine months after that enactment, companies must have converted existing all bearer shares to registered shares.
Barlow Robbins LLP provides company secretarial advice from incorporating new companies, to acting as company secretary or as the company’s registered office or service address, to hosting and facilitation board meetings, as well as advising on constitutions of companies, partnerships and LLPs.