By Mireille Turner, Solicitor
Directors and Company Secretaries need to start thinking now about how they will deal with the changes proposed by the Government in the Small Business, Enterprise and Employment Bill 2014.
The proposal that has attracted the most interest is the requirement to keep a register of who controls the company (known as the register of beneficial ownership or PSC Register) but there are other important changes to be aware of including the abolition of corporate directors and bearer shares as well as alterations to the Companies House filing regime.
We don’t have an exact time-line for when the new laws will come in, however it is likely to be from March 2015, albeit with a staged implementation.
Beneficial Ownership – the “PSC Register”
Companies will have to keep a register of the Persons with Significant Control over the company (PSC’s). This will be a list of the owners or controllers of more than 25% of its shares or voting rights or those who otherwise exercise control over the company or its management. You will need to update this register when changes in ownership occur, or otherwise on an annual basis.
Companies will need to provide to Companies House the full name, date of birth, residential and service address of each owner and the details of their interest (shares or otherwise). PSC’s themselves will also be obliged to disclose their shareholdings. Failure to comply with the rules will be a criminal offence.
Subsidiary companies won’t usually have to go beyond identifying their immediate parent company, if that parent itself keeps a PSC Register (or is exempt from the requirement), but trusts and nominee arrangements may however need to be disclosed.
An End to the Annual Return…
There are going to be a number of changes to the Companies House filing regime.
Companies will no longer be required to file an Annual Return. However, you will still need to keep company information up to date, at least on an annual basis, by either notifying Companies House of any changes when they happen or confirming there have been no changes.
Private companies will no longer have to keep and maintain registers of members or directors (or the new PSC register) at their registered office. However, the information at Companies House must be updated AND more of the information on the register at Companies House will be publicly accessible than would be the case if the company decides to still keep its own registers at its registered office.
The Ban on Corporate Directors
Having a Corporate Director (a company or firm as a director) will no longer be an option other than in limited circumstances (including for listed companies and, depending on the outcome of the latest consultation on the issue, potentially for larger private companies). Existing corporate directors will automatically cease to be directors a year and a day after the new legislation comes into effect.
Bearer Shares to Disappear
The Government will abolish bearer shares. This type of share is owned by the individual who holds the physical share certificate (who does not appear on the company’s register of members), so bearer shares can change hands simply by being physically passed on, which makes tracing ownership more difficult.
Holders of bearer shares will be able to convert their shares into registered shares. The Government has proposed a number of steps that will need to be complied with by companies over the course of a nine month period to achieve this.