Legal Update: Changes that affect you

OCS_JWilliamson-smlThe Small Business, Enterprise and Employment Act 2015 (Act) is one of the relatively infrequent material reforms of UK company law. The measures are primarily aimed at increasing transparency around who controls UK companies and to deter and sanction those who hide their interests. This note from Jonathan Williamson, Corporate Partner at Blandy and Blandy, summarises some of the key changes, all of which are expected to be implemented by October 2016 and looks at what, if anything, companies should be doing now to prepare for them:

Abolition of corporate directors – From October 2016
The Act will require all directors to be natural persons, subject to certain potential exceptions. Existing directors who are not natural persons will automatically cease to be directors 12 months after the provision is in force, therefore thought should now be given as to which individuals may be prepared and available to be appointed, if required.

Abolition of annual returns – From June 2016
Companies will no longer be required to submit an annual return. Instead all companies will be subject to a new requirement to deliver a confirmation statement at least once in each 12 month period stating that the company has delivered all the information required to be delivered to Companies House for the period covered by the confirmation statement (changes to share capital, shareholders and shares held, officers, registered office etc.). If the company has a share capital it must also deliver a statement of capital at the same time as the confirmation statement.

PSC register – From April 2016
The Act sets out a requirement for companies to maintain a register of “people with significant control” (PSC). These are individuals who directly or indirectly own or control more than 25 per cent of a UK company’s shares or voting rights, or who otherwise exercise significant influence or control over the company or its management. The Government has confirmed that these details can be maintained in a publically available register kept by the company or via the Companies House public register where it will be freely available online and searchable by individual name, as well as by company name.

Government guidance has defined “Control” as a person/entity having the power to direct a company’s policies and activities. “Significant influence” means being able to ensure that a company adopts the policies or activities desired by the person/entity holding the significant influence.
Examples of such control and significant influence may include the ability to:-

• adopt or change a business plan
• establish profit sharing or other incentive schemes
• exercise absolute veto rights
• manage or direct the affairs of the company on a day to day basis
• consistently direct or influence a significant section of a board of directors

If a company is a subsidiary of another UK company it must identify its parent as a relevant legal entity (RLE) if it owns or control more than 25 per cent of the shares or voting rights, or otherwise exercises significant influence or control over the company or its management. If not wholly owned, the company must also identify all other RLEs or individual PSCs. New companies will be required to deliver a ‘statement of initial significant control’ on incorporation, alongside other registration documents.

Companies must take reasonable steps to identify anyone who is a PSC and give notice to anyone whom it knows or has reasonable cause to believe to be registrable. If a company fails to give a notice, or otherwise to take reasonable steps to investigate or obtain information required for the PSC register, the company and every officer in default will be liable, on conviction, to a fine and/ or two years imprisonment.

Directors should consider whether the company or any group company will be required to keep a PSC register and how easy it will be to identify any RLEs and PSCs.

If you would like further information or specific advice please contact: Jonathan Williamson Corporate Partner: +44 (0)118 9516832 jonathan.williamson@blandy.co.uk.

 

 

This note is intended to provide general information about some recent and anticipated developments which may be of interest. It is not intended to be comprehensive nor to provide any specific legal advice and should not be acted or relied upon as doing so. Professional advice appropriate to the specific situation should always be obtained.

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