Changes to company law
The Small Business, Enterprise and Employment Act 2015 has finally come into force (as of 26 March this year). It’s an “everything but the kitchen sink” piece of legislation bringing in laws relating to employment, company administration, insolvency and even childcare and the pub adjudicators code. This guidance though will take you through what directors and company secretaries of private companies need to know about the main changes to company law that are most likely to affect their companies.
The part of the new law that has attracted the most publicity is the requirement to keep a register of who controls the company (known as the register of beneficial ownership or “PSC” Register), but there are other important changes to be aware of, including the abolition of corporate directors and alterations to the Companies House filing regime.
Implementation of the Act is in stages, so most companies will need to be gathering information and planning how they will deal with the changes relevant to them as they come in over the next 12 months or so, rather than taking immediate action. The message is “Don’t panic yet, but do start to put things in motion so you don’t have to panic later!”
Beneficial Ownership – the “PSC Register”
Compiling and updating the Register
From January 2016, companies will have to keep a register of the Persons with Significant Control over the company (PSCs). This will be a list of the owners or controllers of more than 25% of its shares or voting rights or those who “otherwise exercise control over the company or its management” (we are still waiting for government guidance as to exactly what this phrase means). This is an additional register to the Register of Members that companies already have to keep.
The details on the register will be the full name, date of birth, residential and service address of each owner and the details of their interest (shares or otherwise). Subsidiary companies won’t usually have to go beyond identifying their immediate parent company, if that parent itself keeps a PSC Register (or is exempt from the requirement), but trusts and nominee arrangements may need to be disclosed.
The register will need updating when changes in ownership occur, or, if there are no changes during a year, on an annual basis.
Providing the Information to Companies House
For new companies the information on the register will need to be provided to Companies House on incorporation. For existing companies the obligation will be from April 2016.
Getting the information from your shareholders
Directors and Company Secretaries who are not certain who their PSCs are will need to start trying to identify and locate their shareholders now.
The new rules oblige companies to take reasonable steps to identify people they know or suspect to be PSCs, and provide powers to companies to write to these people to request the information, and to impose sanctions on them if the information is not provided (such as restricting voting, share transfer and dividend rights).
PSCs themselves will also be obliged to disclose their shareholdings.
Failure to comply with the rules will be a criminal offence for PSCs, the company and its directors and secretary.
An End to the Annual Return…
There are going to be a number of changes to the Companies House filing regime in effect from April 2016.
Companies will no longer be required to file an Annual Return. However, you will still need to keep company information up to date on at least an annual basis by either notifying changes when they happen or confirming there have been no changes.
In addition, companies will no longer have to keep and maintain registers of members or directors (or the new PSC register) at their registered office. However, the information at Companies House must be updated AND if a company opts not to hold registers at its registered office, more of the information on the register at Companies House will be publicly accessible than would be the case if the company decides it will still keep its own registers (for example people will be able to see the full date of birth of the directors).
The Ban on Corporate Directors
From October 2015, having corporate directors (i.e. a director which is a company rather than a person) will no longer be an option other than in limited circumstances. Existing corporate directors will automatically cease to be directors a year and a day after the new legislation comes into effect.
Companies who still have a corporate director will need to consider appointing an additional person as a director if needed for board meetings.