See-through setups

The mammoth, mixed bag that is the Small Business, Enterprise and Employment Bill is currently before the House of Lords. The Department for Business, Innovation & Skills (“BIS”) aims to have at least some provisions in force later this year, others being phased in over 2016.

The bill has wide-ranging effects on areas including employment, insolvency, procurement and commercial contracts. For present purposes, we will focus on certain of the corporate compliance aspects and changes to the Companies Act 2006.

Important changes and provisional dates

According to BIS, the provisional implementation plan for parts 7 (companies: transparency) and 8 (company filing requirements) of the bill looks like this:

Two months after Royal Assent: companies will no longer be able to issue bearer shares.

Bearer shares are a method by which shareholders can remain anonymous, and are considered rare in the UK. Companies with existing bearer shares will be given a nine-month “surrender period” in which they are to be converted or cancelled.

These new provisions are demanding on both bearer shareholders and companies. Companies which cannot remove bearer shares with the agreement of the shareholder within the set period are required to obtain a court order to cancel the share warrant and the shares specified in it.

October 2015: corporate directors will be prohibited (with certain exceptions).

Once the bill is in force, any companies with corporate directors will have 12 months in which to remove the corporate directors and, if required, appoint new directors.

Shortly, we expect to see the results of the BIS consultation on the scope of the exceptions. BIS asked for comments on: corporate directors within groups that include large listed or private companies; certain charitable companies; corporate trustees of pension funds; open-ended investment companies or OEICS; LLPs; Societas Europaea; and corporations sole.

January 2016: companies must keep a public register of persons with significant control (“PSCs”).

At present, a PSC is deemed to be:

• one who directly or indirectly owns or controls more than 25% of the shares or voting rights;
• one who holds the right, directly or indirectly, to appoint or remove a majority of the board;
• one who has the right to exercise, or actually exercises, significant influence or control over a company; or
• (a) the trustees of a trust or the member of a firm that, under the law by which it is governed, is not a legal person which meets any of the other specified conditions (in their capacity as such) in relation to the company, or would do so if they were individuals, and (b) a person who has the right to exercise, or actually exercises, significant influence or control over the activities of that trust or firm.

The PSC register is to maintain details of each PSC’s full name, service address, usual residential address, country/state of usual residence, nationality, date of birth, date on which the individual became a “registrable person in relation to the company”, and the nature of the control. The register can be kept with the company, or at Companies House, but is to be available for public inspection.

Criminal sanctions can be imposed on both the company and the relevant individual who fails to comply with the new obligations.

April 2016: changes to statement of capital; new “confirmation statement” replaces the annual return.

The requirement for companies to include the amount paid up and unpaid on each share will be removed, companies being required instead to detail the aggregate amount unpaid on the total number of shares.

Confirmation statements are to be used instead of annual returns, and are to be filed no more than 12 months from the previous statement of confirmation, incorporation or annual return. The statement is to confirm that all information required to be delivered to the registrar during the confirmation period has been delivered, or will be delivered at the same time as the statement.

Other corporate changes

The general duties of directors contained in the Companies Act 2006 will be extended to shadow directors (an exemption exists for advice given in a professional capacity). Also, companies can opt to maintain certain statutory registers on the central register with Companies House, instead of maintaining their own registers (though to do this with the register of members requires all members to agree).

Implementation in practice

The latest revised BIS timetable demonstrates intentions for the bill to be in place ASAP. Although certain consultations are still ongoing, and various concerns have been raised (including a possible loophole for foreign companies, who can operate in the UK without being subject to this regime), if progress continues at the current pace it is assumed the majority of the bill will be implemented.

Potentially, therefore, companies have a short period to comply with the bill’s provisions, including tracking down any bearer shareholders and starting the removal process, getting a PSC register in place and restructuring where necessary. The complexity and breadth of the bill means corporate advisers will need to be on their toes to help clients consider how best to navigate the new requirements and get their books in order.