Consultation period on the Small Business, Enterprise and Employment Bill to end one week today
The Small Business, Enterprise and Employment Bill was introduced to Parliament on 25 June 2014. This Bill amends the Companies Act 2006 and will require companies to hold and keep available for inspection a register of people with significant control over the company (a PSC Register). A ‘person with significant control’ (a PSC) is an individual who ultimately owns or controls more than 25% of a company’s shares or voting rights, or otherwise exercises control over a company or its management. BIS has been undertaking a consultation period, which is due to end one week today, on 9 December.
Currently companies have to keep a register of members and directors but do not have to record indirect ownership or control.
The Bill will mean that:
- Indirect owners of shares (for example under a trust) will have to be listed on the Register of PSCs if they have more than 25% of a company’s shares or voting rights, or can exercise ‘significant influence or control’ over a company, and are required to disclose their interest in the company under certain circumstances.
- Companies must take reasonable steps to identify people they know or suspect to have ‘significant influence or control’ over a company. Guidance is required on what ‘significant influence or control’ might mean.
- Companies will have to provide an initial statement to Companies House about their PSCs and then update that information every 12 months.
- The PSC Register will be publicly accessible but the PSCs’ residential addresses will be protected from public disclosure.
BIS has been seeking views on the statutory and non-statutory guidance it will produce, the information to be recorded on the Register of PSCs, the protection regime to keep PSCs’ personal data private, and the impact of the proposals – in particular the costs and benefits of the proposed new register.
The government has stated that it intends to implement the register as soon as practicable once the necessary legislation is in place. Companies House is already considering the system changes which will be required to deal with the new register.
The Bill will prohibit UK companies from issuing bearer shares. Bearer shares (also known as share warrants to bearer) are unregistered shares owned by the person who holds the share warrant at any time. They are anonymous, transferable simply by passing the warrant to another person, and an easy means of facilitating illegal activities such as tax evasion or money laundering. Those individuals who hold bearer shares will have nine months to surrender their shares and exchange them for registered shares. If any bearer shares are not surrendered and exchanged, they will need to be cancelled and monies paid into court by the company. Guidance will be needed about the calculation of the amount to be paid into court.
Corporate directors and shadow directors
The Bill proposes to prohibit the use of corporate directors (where one company is the director of another), with some limited exceptions where the use of a corporate director presents a low risk and is of high value to the company. More information will be given in regulations about these exceptions. The Bill is also to provide guidance upon the legal duties which apply to shadow directors – i.e. those individuals who are not listed as directors of a company but control all or the majority of the directors. The relevant guidance states that shadow directors will now have the same legal duties as other directors. It remains to see how this will be regulated in practice given that the nature of shadow directors is that they are not officially listed as directors but control the board in the background.
BIS guidance upon the Bill also states that the government will be introducing measures to deal with disputes about directors’ appointments which are to ensure that company directors are informed of their statutory duties upon appointment.
This Bill can be seen as an effort to make company ownership and control more transparent, which the government hopes will assist enforcement agencies as well as helping the UK to meet international standards on preventing the misuse of companies.