The UK’s Small Business, Enterprise and Employment Act 2015 received Royal Assent on 26 March 2015 and makes important changes to the law applying to UK companies.The new law is designed to address the Government’s key “Transparency and Trust” proposals, aimed at deterring illegal activity such as money-laundering and tax evasion. Below is a summary of the corporate aspects.

What do you need to know?

The key changes and dates are:

Abolition of "bearer of shares" - This was implemented in May 2015 with a nine months’ transitional period for existing bearer shares.

Abolition of corporate directors - Scheduled to come into force in October 2016 with a 12 months’ transitional period for existing corporate directors.

Unquoted companies to keep a public register of people with significant control - 6 April 2016
Details of these people to be provided to Companies House annually - 30 June 2016
Private companies to be able to keep their statutory registers at Companies House, instead of having to keep their own registers - June 2016 (anticipated)
New confirmation statement to replace annual returns - June 2016 (anticipated)
Shortening the period by which Companies House or the directors can strike off a Company - October 2015
The rule which is likely to cause the most controversy for companies is the requirement to keep a register of “people with significant control”, particularly where shares are held by nominees.

Register of people with significant control (PSC register)

How do you establish who has “significant control”?

Hold or control, directly or indirectly, more than 25% of the company’s shares or voting rights; or
Has the power, directly or indirectly, to appoint or remove a majority board (whether directly or indirectly, via a majority stake in another company); or
Has the right to exercise, or exercises significant influence and control over the Company.
More information and statutory guidance on the meaning of ‘significant influence and control’ is expected from The Secretary of State in October 2016.

The PSC register

A UK company will have responsibility to identify and keep up-to-date a register of its PSCs and PSCs will have duties to disclose their identities to the company. This places obligations on both the company and its shareholders to provide relevant information for inclusion on the PSC register. The PSC register must be kept available for inspection at its registered office.
The PSC register must contain in the case of an individual, his name, service addresses, country of residence, nationality and date of birth and for corporate entities, its name, registered office, legal status and governing law and any registration numbers. For all PSCs details of the date on which the person/legal entity gained control and the level of interest must also be recorded.
Filing Requirements

Companies will be required to make a statement of initial significant control at Companies House and to deliver annually a confirmation statement (the replacement for the annual return) as to whether or not there are any PSCs.
Private companies have the option of keeping information on the public register at Companies House instead of maintaining a separate PSC Register but certain formalities must be followed.
Sanctions

A company can impose sanctions if its PSCs do not comply with their disclosure obligations such as loss of voting rights and transfer restrictions. Furthermore, the company will be able to impose these sanctions without going to court.
There will be criminal penalties for the company, its directors and secretary, and PSCs, if they do not company with the new rules.
The burden will largely fall on private companies, as listed companies (including AIM companies) will be exempt. However, the new rules are more onerous for private companies, in that they must try to identify their significant controllers by serving information requests.

The new regime is expected to be extended to LLPs but there are currently no formal proposals.

What should you do now?

While some of the changes are welcomed by businesses, the new rules increase the compliance burdens with regard to identifying and disclosing their significant controllers, particularly those companies with complex share ownership structures.

Check the Companies House website for updated press releases as the dates of implementation do keep changing.

Please contact Sandra Crichton on 01484 821 413 or deborahmelluish@eatonsmith.co.uk

The information contained in this article is for information only, is not exhaustive and does not constitute legal advice. You should take specific legal advice before acting on any of the issues raised in this article.