The Small Business, Enterprise and Employment Act 2015 ('SBEEA') received Royal Assent on 26 March 2015. The name of the act is very misleading as most Directors and Shareholders may assume that they will not be affected as they are not part of a 'small business'.
The reality is that many companies will only realise that the major changes will affect them as the different sections of SBEEA are implemented. The government has stated that the main purpose of SBEEA is to create further transparency and trust in UK companies, and to make the filing process simpler.
Below are a list of the changes which have already been implemented by the government and a list of changes which are due to be implemented from early 2016 onwards. For those changes which are due to be implemented, the government has provided provisional dates.
What changes have been introduced already (from May 2015 to December 2015)?
1. SBEEA 2015, s.84-86 - The prohibition of bearer shares. The government has banned companies from being able to issue any new bearer shares from 26th May 2015 and has given companies 9 months to surrender any current bearer shares and exchange those for registered shares. Companies have until 26th February to surrender and exchange their bearer shares for registered shares. If this is not done in time then the company will be made to cancel the shares and pay a court fine. The aim of this is to cease illegal activity due to bearer shares being held anonymously and being transferred numerous times with no record. The government has estimated there to be only 3000 bearer shareholders in the UK.
2. SBEEA 2015, s.15-16 - The Secretary of State has been given until the 31 May 2017 to introduce a streamlined company registration procedure. The Secretary of State has suggested that this will involve a single system which will register a company at Companies House and with HMRC in one procedure.
3. SBEEA 2015, s.89-91 - Directors duties will now apply to shadow directors. The definition of shadow director under s251 of the Companies Act 2006 will also be changed in accordance with SBEEA s.90. The directors duties set out in the Companies Act 2006 will be adapted to apply to shadow directors where necessary.
4. SBEEA 2015, s.99 - A simpler process for amending a registered office. Companies House will be developing a simpler system which will allow them to change or remove a registered office of a company when it is inaccurate.
5. SBEEA 2015, s.103 - A faster strike off procedure. Companies House will now be able to strike off companies from the register weeks faster than before. This will allow Companies House to keep the register up to date.
6. SBEEA 2015, s.96 - Directors' dates of birth shown on the register. Previously the full date of birth of any director was shown on the register and could easily be accessed by members of the public. Since Companies House have made it free of charge and even easier to download company documents with their new BETA service the need to protect directors' information has increased. Now, only the month and year of birth will be shown to the public in an attempt to prevent identity theft.
What changes will be implemented from January 2016 onwards?
1. SBEEA 2015, s.81-83, Sch. 3 - Companies must keep a PSC register (Provisional date of April 2016). This is possibly one of the largest changes which will affect all companies. All companies in the UK will now need to keep a register which shows who the legal and beneficial owners of the companies are and this will be made publically available on a central registry held at Companies House. This needs to be filed with Companies House by 30th June 2016. The only exception to this change will be those companies which are excluded by any new regulations or companies to which the FCA's Disclosure Rules and Transparency Rules (DTR5) apply. The purpose of this change is to create certainty and transparency as to who has ultimate control of a company. A PSC has been defined as a legal person who has ultimate control over that company. SBEEA goes on to define 'ultimate control' as:
- Direct or indirect ownership of more than 25% of the shares in the company;
- Direct or indirect control of more than 25% of the voting rights in the company;
- Direct or indirect right to appoint or remove a majority of the directors of the company;
- The exercise or right to exercise significant influence over the company; or
- The exercise or right to exercise significant influence or control over the activities of a trust or firm which meets one or more of the first four conditions.
This change could mean that many more people involved with a company who are not shareholders will need to be registered at Companies House and their personal details will be made available to the public (apart from their residential address and the day of their date of birth). The register should be updated and kept for inspection by all companies and the information on the register should include the name, date of birth, nationality, address and details of a PSC's interest in the company. The register must be filed at Companies House on incorporation and should be updated every 12 months. The annual return will be replaced with a new confirmation statement in June 2016 which will allow companies to confirm that there have been no changes to the information previously provided to Companies House. Notice will need to be given to anyone within the company who has significant control or who the company suspects has significant control and the PSC will need to inform the company of any changes. The burden now lies with the company to produce this information. Further guidance will be issued by the government in due course.
2. SBEEA 2015, s.97 - Simplification of the statement of capital (Provisional date of June 2016). The information required on the statement of capital will be simplified.
3. SBEEA 2015, s.94, Sch.5 - Companies no longer need to keep registers at their office if it is on the public register (Provisional date of June 2016). If a company decides to only hold the information on the public register rather than to also keep a copy at their own offices, the public register will show the full dates of birth of PSCs and directors.
4. SBEEA 2015, s.104–111, Sch.7 - Director disqualification (Provisional date of June 2016). This change means that directors may be disqualified for any overseas misconduct.
5. SBEEA 2015, s.87-88 - Prohibition of corporate directors (Provisional date of October 2016). Companies will no longer be able to appoint other companies as their directors. The aim of this change is to increase the accountability of directors. Exceptions will be included in the regulations but these have not yet been provided by the government. Companies who currently have corporate directors will have about a year from when this is implemented to remove such directors.
There are many other changes which have or will be brought into force over the next few years including changes to insolvency laws. This article only sets out the main changes which will affect private limited companies in the UK. If you wish to know more you will find the full legislation at http://www.legislation.gov.uk/ukpga/2015/26/contents/enacted.
This is not legal advice; it is intended to provide information of general interest about current legal issues.