This half-yearly update briefing summarises the major developments in UK corporate law and regulation which have occurred over the last six months and which will be of relevance to UK listed companies.

'On the horizon' – the more material developments we expect to see in the next 6-12 months:

TCFD reporting for all companies for financial years starting on or after April 2022 – see item E1 below

Diversity reporting for listed companies for financial years starting on or after April 2022, but the FCA is encouraging early adoption – see item C3 below

Companies House reform that will impact all companies due to the extensive nature of the proposals – see item A1 below

Wide ranging audit and corporate governance reform which will impact many large and listed companies – see item F1 below

Hill Review package of reforms – a restructuring of the UK listing regime is in progress, the Secondary Capital Raising Review is due to report back, and draft legislation to give powers back to the FCA around prospectuses is expected this year – see items C1, C2 and D1

 

A. Company law

1. Reform of Companies House and ban on corporate directors

In February 2022, the Government published a White Paper on the reform of Companies House.

Enhanced role and greater powers for Companies House

The reforms will result in the biggest change in the role of the Registrar since it was created in 1884, turning it from a largely passive recipient of information to a much more active gatekeeper. Under the plans, Companies House will:

  • Power to query information – be given the power to query any filings (including company names) that appear erroneous, anomalous or suspicious, and which may impact the integrity of the register or the wider business environment. It will have power to request further evidence and/or reject the filing;
  • Power to remove information from the register – have power to remove material from the register more swiftly and in wider circumstances than is currently the case; and
  • Digital filing of information – be able to require all information to be filed digitally. Company accounts will have to be tagged and filed in iXBRL.

Identity verification

New identity verification requirements will be introduced for all new and existing company directors (and equivalents for other entities), people with significant control (PSCs) and those filing information with Companies House. UK company formation agents that register with Companies House can conduct the checks. Directors and PSCs who do not verify their ID will commit a criminal offence and/or incur a civil penalty. Companies that have an unverified director will also commit an offence.

Ban on corporate directors

The ban on corporate directors (contained in the Small Business, Enterprise and Employment Act 2015) will also be implemented. The only exception is where:

  • all the directors of the corporate director are natural persons; and
  • prior to their appointment as directors of the corporate director, all the directors have had their identities verified.

Only UK registered corporate directors will be permitted – companies will not be able to have overseasregistered corporate directors.

An easy reference snapshot of the proposals can be found here.

2. Register of overseas entities that own UK property and latest on sanctions

Register of overseas entities owning UK property

Under the Economic Crime (Transparency and Enforcement) Act 2022, which received Royal Assent on 15 March 2022, overseas entities that own land in the UK will have to be listed on a public register at Companies House. They will be required to:

  • take steps to identify their beneficial owner(s);
  • register information about their beneficial owner(s) at Companies House; and
  • update that information periodically (or confirm that the information on the register is up-to-date).

The requirement will only come into force once the necessary secondary legislation has been passed but, once in force, any overseas entity that becomes, or has since 1 January 1999 become, the registered owner of any UK land will have to go on the register. The definition of beneficial owner and the information required in relation to beneficial owners in the Act are substantially the same as under the UK Companies Act 2006 people with significant control regime.

If an overseas entity fails to register with Companies House, or to comply with the duty to update the information, in most cases this will affect the ability of the entity to sell or lease the land, or create a charge over it, as the other party would be unable to register the transaction with the Land Registry. The Act also sets out various sanctions that could be imposed on the entity, including fines for directors if they fail to comply.

An overview of the impact of the Act, and the transitional provisions in relation to land already owned by overseas entities, is available here.

Sanctions

The Act also makes significant changes to the sanctions regime in the UK which will have wider and longerterm ramifications beyond the conflict in Ukraine.

Of particular interest to listed companies are the amendments made by the Act to the Policing and Crime Act 2017. From 15 June 2022, the amendments introduced a strict civil liability regime in the UK for companies that breach financial sanctions legislation – there is no longer a requirement to know about, or have reasonable cause to suspect, relevant matters (for example that a transaction involves a Designated Person).

The Treasury has also been given powers to publish reports in cases where a monetary penalty has not been imposed but it is satisfied that a person has breached a prohibition or failed to comply with an obligation imposed under financial sanctions legislation (on the balance of probabilities)

The implications of these changes will need to be considered in relation to any ordinary course corporate actions, e.g. which involve payments to shareholders or shareholders exercising voting or other rights.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.