After its original announcement in 2014 the Small Business, Enterprise and Employment Act gained Royal Assent in March 2015. The scope of the Act is expansive and there will be significant changes to the laws behind corporate transparency, dispute resolution and statutory filing.
Predominantly, the driving force behind the planned provisions is to increase trust in UK companies. This will ultimately make the UK a more attractive place to invest and do business. The administrative burden of operating a company is also set to be reduced, with the reduction of red-tape associated with the filing of documents.
There are also plans to increase the availability of finance which should theoretically reduce barriers to entry and facilitate the growth of small businesses and enterprises in the UK. The planned changes are set to be implemented in stages over the next 12 months.
Corporate Transparency – Trust and Transparency Provisions
Whilst they were rarely used, a company could previously issue bearer shares. These shares were owned by whoever owned the physical stock certificate. This made it very difficult to establish who the beneficial owners of a company were in certain cases. As of the 26th of May 2015 bearer shares were abolished as one measure of increasing corporate transparency.
From the 6th of April, UK companies will be legally required to hold a register detailing all people with significant control (PSC).
Companies House define a person of significant control as someone who –
- owns more than 25% of the company’s shares
- holds more than 25% of the company’s voting rights
- holds the right to appoint or remove the majority of directors
- has the right to, or actually exercises significant influence or control
- holds the right to exercise or actually exercises significant control over a trust or company that meets one of the first 4 conditions.
Corporate directors are also set to be abolished with limited exceptions in certain circumstances.
Overall, these provisions are designed to prevent ‘Shadow owners’ of a company by making it easier to identify who the beneficial owners are. A higher degree of transparency should, in theory, increase trust and promote investment in UK companies.
Document Filing – Reducing Red-Tape
In an effort to reduce regulatory burdens on small companies, there have been several changes to the filing requirements of a UK registered company. First and foremost the annual return has been completely replaced with a confirmation statement. As with the annual return, there will be a fee to pay when submitting the confirmation statement; however, you will only be charged once a year irrespective of how many statements were submitted. This change is set to come into force in April 2016.
The time taken to strike a company off the register will also be reduced to a minimum of 2 months.
A simpler approach to disputing appointments of directors and registered office addresses is set to be introduced. This provisions should make the process of removing erroneous information from the Company Register easier and more efficient.
If a dispute against the appointment of a director is filed, the company in question will need to provide evidence that this director ‘consented to act’ or the appointment will be removed.
Additionally, if a company cannot prove they have consent to use an address as their registered office address the Companies House registrar can nominate a default registered office address for them for each jurisdiction.
Only time will tell if the desired effects of these changes will be realised. Nevertheless, the Small Business, Enterprise and Employment Act is a welcome improvement on the existing Companies Act. Reductions in Bureaucracy and a more transparent business environment should facilitate growth for small enterprises in the UK. Larger entities should also be aware of how they will be affected by the planned provisions. This is intended as a general overview only and further guidance can be obtained from Companies House directly.