Paul Lester identifies the minor recent – and major upcoming – changes to company administration of which businesses need to be aware
Businesses operating in the property market need to make sure they have made any changes to company administration required as a result of those parts of the Small Business, Enterprise and Employment Act 2015 (“the Act”) which have already been brought into effect, and must also be prepared for the further changes coming in next year.
The changes will affect all companies, and limited liability partnerships (“LLPs”) to some degree, as the Act has an impact on a wide range of areas, from company records to filings and the appointment of directors. The changes which have already been brought in were those considered likely to have the smallest impact on businesses, such as the abolition of bearer shares in May 2015.
In October 2015, for most companies the most notable change introduced was in the way directors and secretaries consent to act in these positions when first appointed, which has been reflected in amended Companies House forms. December 2015 sees a simplification of the procedures for getting falsely appointed directors removed from the register and for dealing with companies using unauthorised registered offices. At present a court order is usually required to rectify the register if you find another company is using your building without permission as its registered office, so an easier way to stop that will be welcome.
However, the parts of the Act coming into effect in 2016 will have more far-reaching effects, including the abolition of corporate directors and the register of persons with significant control (“PSCs”), dealing with beneficial ownership.
Persons with significant control
The area of the Act which has received most publicity is the new “beneficial owners” register, which is part of the government’s drive to increase “trust and transparency” in business. The requirement to keep (at the registered office) a register of PSCs over a company (“the PSC register”), will come in from April 2016, but the information will not have to be filed with Companies House until 30 June 2016. Currently the requirement is set to fall only on non-listed companies, but the government has advised that it will be extended to cover LLPs as well.
A person (an individual and most other non-corporate bodies) is a PSC if he, directly or indirectly:
- holds 25% or more of the share capital (by nominal value);
- can exercise 25% of the voting rights;
- is entitled to appoint a majority of the board;
- is otherwise able to exercise “significant influence or control” over the company; or
- is a trustee, or a member of a firm, and meets any of the above tests.
If the main shareholders (applying the same thresholds as above) are themselves companies (eg in a group situation) then they should be noted in the PSC register as a relevant legal entity (“RLE”).
While in most cases determining who is a PSC should be relatively straightforward, we are still awaiting government guidance on precisely what else may constitute “significant influence or control”.
Both companies and PSCs themselves are under a duty to provide the information. Companies will be required to send a notice to those individuals or bodies whom they think may be PSCs, and if they do not get a response, companies can issue a warning notice and then a restrictions notice, effectively freezing the owner’s shares.
Information tracking
The information on the PSC register held at the company’s registered office will need updating as and when it changes, but the record held at Companies House will need to be updated via the “check and confirm” system that is coming in from June 2016 (which system will also replace the current requirement to file an annual return).
The option to do away with keeping separate registers (members, directors, etc) at the registered office in favour of keeping all the information at Companies House will be available from June 2016, but if you take up this option all the information on the records at Companies House will be viewable by the public (full date of birth of directors, for example). Changes to statements of capital will come in at the same time.
Corporate directors
The prohibition on corporate directors will now come into effect in October 2016, but we are still awaiting details of how this will work. The original proposal was an outright ban with limited exceptions, but the government was swayed by the feedback from its initial consultation into thinking that corporate directors may have more value than they first realised. It may be the case that corporate directors will be permitted if all the directors of the corporate director are individuals (not companies for example) and the corporate director is formed in a country (such as England) where the identity of the individual directors is publicly available.
The Act touches on a wide range of other areas, but one of the most notable is the proposed requirement for large companies and large LLPs to publish information about their payment practices and policies on their websites, which is due to come in from April 2016.
The timetable for implementation of the Act has previously slipped, and it may well be that we see the more intrusive changes delayed again, but owners and directors of property businesses should not delay in drawing up a plan for compliance, particularly if they are aware that owners may prove difficult to identify or contact, or if corporate directors feature on any boards in their corporate group structures.
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Paul Lester is a partner at Cripps
