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
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
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.
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