New Laws to Make Companies More Accountable
In an attempt to increase transparency and make companies more accountable, the Government is introducing a raft of new laws as part of the Small Business, Enterprise and Employment Act (SBEEA) 2015.
All companies will be affected in some way so it’s important that you know what the changes are and when they come into force otherwise you could end up having to pay a rather hefty fine or even facing criminal prosecution.
One of the most significant reforms is the introduction of the PSC register which is designed to make it harder for people to hide their business interests. From April 2016 all companies will be required to keep a register of ‘persons with significant control’ (PSC) which will be publicly available via Companies House.
A PSC is defined as someone who owns or controls more than 25% of a company’s shares or voting rights, or who simply has a significant influence.
Secondly, the use of corporate directors (one company as the director of another) will be effectively prohibited (subject to limited exceptions) from October 2016. Companies with existing corporate directors will have a ‘grace period’ of one year to replace them with natural persons (i.e. human beings, and not artificial legal persons such as companies). The use of corporate directors is being restricted mainly because of their lack of accountability and transparency. The Institute of Directors among others, has voiced the idea that a director should normally be the accountable ‘human face’ of a company.
Similarly, in order to increase accountability, the Act confirms that shadow directors (someone who is not a named director but who directs or controls the company) have the same statutory duties as directors who have been properly appointed and recorded at Companies House.
As part of the Act the government has also decided to abolish bearer shares. Because the holders of bearer shares are not necessarily known to the companies that have them in issue they are seen as an easy means of hiding criminal activity such as tax evasion or money laundering. Existing bearer shareholders have until 26th February 2016 to surrender their shares to the company and have them exchanged for registered shares. Annual return’s filing process has also been simplified.
From June 2016, where there have been no changes on the registers, companies will be able to confirm the company information by filling a confirmation statement every 12 months. These are just some of the measures being introduced by the Government to help address the current economic imbalance in power between small and large companies and shine a light on poor practice, enhancing the reputation of the UK as a trusted and fair place to do business.
However, the changes also place an extra administrative burden on many businesses which is where Andrew & Co LLP can help. To find out more or to request a fact sheet about SEEBA 2015 or the services we provide, contact Margarita Louca or Andrew Tinker on 01522 781468 or email Margarita.Louca@andrew-solicitors.co.uk or any other member of the Company & Commercial team.