In what can certainly be described as an 'eventful' year on the whole, 2016 also saw a number of key developments in UK Company law take place.
Many of these changes were a result of the Small Business, Enterprise and Employment Act 2015 being rolled out in phases. This piece of legislation is a key feature of the Government's drive to achieve greater transparency in this area.
2017 will see further changes which pose the question: Is your business suitably transparent?
The Abolition of Corporate Directors
Currently, a company can appoint another company as one of its directors – namely a 'corporate director'. However, subject to as yet undefined exceptions, all company directors will soon have to be natural persons. This feature of 2015 Act was expected to come into force originally in October 2015 (and then in October 2016) but implementation has been delayed. The Department of Business, Energy and Industrial Strategy has since reiterated that the ban will still be implemented.
Once introduced, there will be a transition period of 12 months for companies to remove/replace their corporate directors. After 12 months of the ban coming into place, corporate directors will automatically cease to be so. Therefore, companies may well have to be proactive in ensuring compliance with their own Articles of Association.
EU Directive and Beneficial Ownership
The Fourth Money Laundering Directive (2015/849/EU) came into force in 2015 and last year saw the Persons with Significant Control (PSC) regime introduced. This is generally consistent with the Directive as things stand. However, some amendments may be necessary and introduced over the course of the next 12 months. One such consideration is extending the scope of the entities required to obtain and hold information to all those incorporated in the UK and capable of having a beneficial owner – notably, this would include Scottish partnerships and Scottish limited partnerships.
A further expected change is a new obligation for all entities to update their PSC information within six months of a change occurring, where necessary, in addition to the annual confirmation statement. While not popular with all business owners due to the increased administrative burden, transparency appears to be all the rage in 2017!
Corporate Criminal Offence – Failure to Prevent the Facilitation of Tax Evasion
It will soon be possible for a company to be held liable for its failure to prevent an associated person facilitating tax evasion on behalf of the company, even if directors were uninvolved and unaware. There will be three elements to the offence:
- Criminal tax evasion by a taxpayer (be it an individual or legal entity);
- Criminal facilitation of this offence by an 'associated person', which can include an employee or agent of the company, acting in that capacity; and
- The relevant body failed to prevent (1) and (2).
Before managing directors and business owners reading this break out in a cold sweat, a defence is available if the company can show that it took reasonable measures to prevent facilitation by associated persons or it would be unreasonable to expect them to have such procedures in place. It is therefore crucial that businesses seek advice as to what is required of them and ensure they are compliant in this area. The offence is due to be implemented by September this year and could see guilty companies subjected to an unlimited fine – not an appealing thought!
Final Thoughts
Of course, 2017 is likely to be dominated by one issue – Brexit. Undoubtedly the outcome of any Brexit negotiations and deal agreed is likely to have a significant impact on several aspects of your business going forward. We will all have to wait for greater transparency from Brussels and Westminster in this respect but, in the meantime, ensuring your business complies with its own transparency requirements is a New Year's resolution to keep a hold of.
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.
