UK: Small Business, Enterprise And Employment Act 2015

On 26 March 2015, the Small Business, Enterprise and Employment Bill received the Royal Assent. It will come into force in various stages, starting two months after Royal Assent.

Register of Persons having Significant Control (the "PSC Register")

All companies will be required to maintain and keep open for public inspection a PSC register. The principal objective is to increase transparency around who controls UK companies and deter and sanction those who hide their interests. A person having significant control of a company will be any individual who:

  • holds, directly or indirectly, 25% or more of a company's shares or voting rights;
  • has the right, directly or indirectly, to appoint or remove the majority of the board; or
  • exercises, or has the right to exercise, significant influence or control over the company.

The meaning of "significant influence or control" will be detailed in guidance to be published in October 2015. The obligation to maintain a PSC register will apply to all companies other than those to which Chapter 5 of the Disclosure and Transparency Rules ("DTRs") apply and Limited Liability Partnerships (although the Department for Business, Innovation and Skills ("BIS") has confirmed delegated legislation will introduce the same requirements for LLPs) and any other entities as the Secretary of State specifies. Companies obliged to maintain the register will have duties to take reasonable steps to investigate and obtain up-to-date information on registrable persons ("PSCs") as well as serve notices on persons they know, or have reasonable cause to believe, may have information on the identity of such PSCs.

The Bill also proposes introducing obligations on the PSCs to supply the relevant information to the company. Where an individual fails to comply with its disclosure obligations, the company has the right to serve a restrictions notice which has the effect of preventing the individual from exercising any rights associated with their shares. This means that any proposed transfer of the interests associated with the shares will be void and the company may not pay any sums due to the person in respect of the shares other than in liquidation.

Shadow Directors

The Bill provides that the general duties of directors (as set out in the Companies Act 2006) shall apply to shadow directors "where and to the extent they are capable of applying". Further, the definition of shadow director is to be amended so that a person will not be a shadow director if the board acts in accordance with instructions or directions given by that person in the exercise of a function conferred by or under legislation.

Corporate Directors

The appointment of corporate directors will be prohibited so that all directors must be natural persons. Any appointment made in contravention of this requirement will be void and existing corporate directors will automatically cease to be directors a year after the new legislation comes into force. Unless they are replaced with individual directors before then, companies will need to consider the impact on quorum requirements and provisions in the Articles of Association as to the minimum number of directors. However, the Act gives the Secretary of State the power to make regulations regarding exemptions, such as where having a corporate director represents a low risk or where high standards of corporate governance or disclosure apply.

Company Filing Requirements

The Bill also introduces provisions designed to simplify company filing requirements and make the administration of larger groups easier.

These changes include:

  • replacing the requirement to complete an annual return with the ability to deliver a confirmation statement in each 12-month period stating that there have been no changes to the information on record;
  • the ability to keep information on a central register at Companies House instead of maintaining the relevant statutory registers;
  • amending the information required in statements of capital so that companies will only be required to show the aggregate amount unpaid on shares; and
  • shortening the procedure for striking off a company to two months.

Further Provisions

The Act also makes certain changes with regards to directors' disqualification and liability to compensation orders and to UK insolvency procedures.

A copy of the Act and relevant explanatory notes can be seen here: http://services.parliament.uk/bills/2014-15/smallbusinessenterpriseandemployment/documents.html.

The Government has also produced a number of fact sheets to give further information on certain aspects of the Act. A copy of the following fact sheets is available as follows:

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.

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