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The Small Business, Enterprise and Employment Act 2015

The Small Business, Enterprise and Employment Act 2015

The Small Business, Enterprise and Employment Act 2015 (the “Act”) received Royal Assent on 26 March 2015.  The Act will implement measures over the next year, making significant changes to certain aspects of UK company law.  These changes are the result of the Government’s determination to reduce the red tape faced by smaller companies and improve the transparency and trust placed in UK companies.

The key changes affecting UK companies will begin implementation from May 2015, as summarised below:

  • Bearer shares allow ownership to be determined by physically holding the certificate, making them extremely portable but also making ownership very difficult to trace.  From May 2015 the issue of new bearer shares will be prohibited and a grace period of nine months will begin, requiring those companies with existing bearer shares to convert these to ordinary shares in their capital.
  • October 2015 will see any new director appointments notified to Companies House disclosing only month and year of birth on public records, to provide increased protection from identity theft to directors.  Private companies who opt to have their registers maintained by Companies House (which will include the register of directors), will lose the protection granted by this provision of the Act.
  • UK companies will be prohibited from having corporate directors with effect from October 2015 (other than certain exceptions, the circumstances of which have yet to be confirmed).  The default position will be that all directors require to be natural persons.  Companies will have one year from the date of implementation to resolve the position regarding existing corporate directors, after which time they will be deemed to no longer be directors of the company.
  • Perhaps the most controversial change being implemented by the Act will be the requirement for companies to maintain a register of Persons with Significant Control, or PSC register.  This register will exist independently of the register of members, and will record details of the underlying beneficial owners or controllers of shares, thus allowing easy identification.  The information contained in the PSC register will be available via Companies House online records.  This new requirement, which will become effective from January 2016, will place an increased burden on companies to monitor and investigate underlying ownership of shares in the company to ensure ongoing compliance with disclosure requirements.  The Act provides details of who will be consider as a person with significant control in relation to a UK company, but generally speaking these will be a person who (alone or jointly with others):
    • Owns or controls more than 25 per cent of the shares or voting rights; or
    • Has the ability to appoint or remove a majority of the board of directors; or
    • Has the right to exercise significant influence or control over the company.

The responsibility will lie with companies to obtain, maintain and record details of persons with significant control, and provide these details to Companies House on an annual basis.  There will also be a responsibility on individuals to notify when they become, or cease to be, a person with significant control. Failure to do so, on the part of either company or individual, may result in criminal penalties being imposed.

  • Private companies will be able to elect to have their registers maintained by Companies House.  This provision, effective from April 2016, will cover registers of members, directors and secretaries, and directors’ residential addresses.  Directors will be responsible for ensuring that appropriate information for inclusion in statutory registers is submitted to Companies House in an accurate and timely fashion.  Directors will also continue to be responsible for maintaining statutory registers not covered by these provisions.
  • Also from April 2016, annual returns will be replacement by “confirmation statements”, submitted to Companies House in every twelve month period.  This will provide more flexibility to companies in setting the timetable for confirming to Companies House that information held on record is accurate.  The confirmation statement will include most details presently included in the annual return, as well as details of the company’s “persons with significant control”. 

Looking to the longer term, these changes will provide some administrative benefits to smaller companies; however the more immediate future is certain to be a challenging time for companies as they progress through the changes implemented by the Act.

Gary Gray
Chartered Secretary