When enacted this Bill (provided it maintains its current form) will have far reaching effects on UK companies, including amongst other provisions, forcing them to disclose information on beneficial ownership, changing the way they report changes in their structure and abolishing corporate directors.
Information on beneficial ownership
Corporate transparency was pushed to the foreground by the UK Government during last year’s G8 summit under the banner of improving accountability to create ‘a level playing field and an environment in which investors and honest entrepreneurs are prepared to undertake the activity we need to promote growth and employment’ .
To achieve the desired corporate transparency, companies will be required to maintain a register of ‘people with significant control’ (“PSCs”); this register must be made public. The name, service address, date of birth and nationality of the PSC will need to be included in the register, as well as, of course, the date they became a PSC and the reasons they are considered a PSC.
Broadly speaking, PSCs will be individuals who:-
- hold, directly or indirectly, more than 25% of a company’s shares;
- are entitled, directly or indirectly, to exercise (or control the exercise of) more than 25% of the voting rights in a company;
- are entitled, directly or indirectly, to appoint or remove (or control that appointment or removal) of a majority of a company’s directors; or
- have the right to exercise significant influence or control over a company.
Companies, and PSCs themselves, will be under a positive obligation to disclose the relevant information to ensure that the register is maintained. Failure to maintain the register will be a criminal offence of the directors of the company; in its current form the Bill provides for up to 2 years imprisonment and/or a fine.
Changes to reporting
Companies will be able to choose to maintain certain statutory registers online at Companies House. This will include registers of directors, members and the new PSC register. The company will have to make filings at Companies House to record any changes, and will not have to mark this change in their statutory books.
There will no longer be a requirement to file an annual return, but to ‘check, notify and confirm’ the information held at Companies House once in every 12 month period. In practice, for those who already deal with Companies House filings electronically, the process is unlikely to change dramatically.
Abolition of corporate directors
It is currently envisaged that there will be a one year ‘grace period’ once the Bill is enacted before the abolition comes into effect. From that point on, all directors must be natural persons (i.e. individuals). Any remaining corporate directors will have their directorships terminated. To avoid potential issues companies should note to consider replacing corporate directors as soon as the Bill becomes law.
The Bill will continue through the parliamentary process and the Government’s most recent position is that it expects the Bill to become law before the next election in May 2015. The Bill is making good progress so far but there are concerns over costs, proportionality and privacy issues, so whether the Government’s ambitions to get the Bill passed before the next election takes place will be achieved remains open to question.
We will continue to track the Bill’s progress and will provide further updates in due course, however, if you have any queries in the meantime contact firstname.lastname@example.org or 01603 598000.