What's new in company law from Higgs & Sons
April 11, 2017
Katie Willems, Higgs & Sons
Several measures aimed at simplifying company filing requirements and increasing transparency are contained in the Small Business, Enterprise and Employment Act 2015.
Since 6 April 2016, private companies have been required to maintain a register of persons with significant control (or PSC register) which, broadly, is a register of individuals (known as PSCs) or relevant legal entities (known as RLEs) who have significant influence or control over that company, such as its shareholders. The aim is to increase transparency around who controls companies and who could make decisions as to how they are run.
The rules around PSC registers include obligations to take steps to identify PSCs and RLEs, confirm registrable information and maintain the PSC register as the ownership and control of the company changes. Failure to comply with these obligations is a criminal offence.
Whereas the vast majority of PSC registers will be relatively straightforward, the process can be more complex where group structures or trust arrangements are in place, or where the company has offshore ownership.
We suggest that steps are taken to ensure compliance with these provisions, if this process is not already underway.
On 30 June 2016 the annual return was replaced with an annually filed confirmation statement. Whilst the two forms are essentially very similar, the change to the confirmation statement signals a change in approach. Instead of informing Companies House of the relevant details every year, companies and LLPs are required to confirm that the information held about them by Companies House is correct. The confirmation statement also now incorporates the delivery of information around PSCs.
As with annual returns, the filing deadline for a confirmation statement is 14 days after the anniversary of either the date of incorporation or the date of the last annual return, although confirmation statements can be filed early if needed.
Central statutory registers
An option is now available for private limited companies to elect to maintain certain parts of their statutory registers at Companies House, rather than keeping these internally.
This option relates only to the company’s registers of members (i.e. shareholders), directors, company secretaries and directors’ residential addresses, although shareholder consent is required if the register of members is to be kept at Companies House.
Companies will still be required to keep the registers they held before the election took place as a historic record.
Equivalent provisions also apply to the keeping of PSC registers at Companies House.
Ban on corporate directors
A ban on corporate entities acting as directors of UK companies is due to be introduced. This ban was initially due to be implemented in October 2016, but has been delayed, with no new implementation date confirmed as of yet.
There are likely to be limited exceptions to this ban, although these are yet to be published.
In terms of forward planning, we suggest that consideration is given to replacing any corporate directors with appropriate individuals and assessing any impact of such changes on the company’s constitutional documents, such as quorum requirements for board meetings.
Once this ban has been introduced, the directorships of any corporate directors will automatically cease 12 months following the implementation date.
It is expected that certain companies and LLPs will be required to report bi-annually on their payment practices, policies and performance, in relation to financial years beginning on or after 6 April 2017. Although the details of this scheme remain in draft form, it is proposed that such information will be published on a web-based service provided by the government and that failure to comply will be a criminal offence.
Broadly, the information to be disclosed as part of this reporting requirement will include:
- standard payment terms;
- processes for resolving payment-related disputes with suppliers;
- average time taken by the company to pay;
- the proportion of invoices paid beyond agreed terms;
- the proportion of invoices paid within set periods of time; and
- any late payment interest owed and paid.
Whether or not your organisation qualifies for this reporting requirement is expected to depend on whether two out of three thresholds are met in the previous two financial years (annual turnover exceeding £36 million, balance sheet total exceeding £18 million and/or average employee numbers exceeding 250).
We suggest that companies and LLPs which are likely to qualify review their payment practices and policies now, including ensuring that their systems allow them to compile the data necessary for compliance with this duty.