The Small Business, Enterprise and Employment Bill is currently passing through the Parliamentary process and still faces a drawn-out process of review and amendment before becoming law. The bill is being hailed as the next stage in cutting the red tape associated with company administration, particularly in relation to the upkeep of statutory registers and Companies House filings. A cursory look over the draft bill, however, reveals that apart from some over-egged innovations, the majority of changes proposed to ease the administrative burden are skin deep.
Under the Companies Act 2006, companies are required to hold various statutory registers, notably in relation to their shareholders and officers, at their registered office. Companies are also obliged to inform the Registrar of Companies of their share capital, shareholders and officers at incorporation and to keep the Registrar up-to-date with any changes to these vital statistics through a notoriously user-unfriendly statutory filing regime.
The proposed bill makes several changes to the statutory registers that must be maintained by companies, most notably in its requirement for a register of persons with significant control over the company (“PSCs”). In simple terms a PSC is an individual who:
(a) holds more than 25% of the company’s shares; or
(b) is entitled to exercise, or control exercise of, over 25% of the voting rights in the company; or
(c) is entitled to appoint or remove a majority of the board (or to control those so entitled); or
(d) has the right to or actually exercises significant control over the company.
While motivated by a desire to increase the transparency of company ownership, this obligation will increase the administrative burden on companies, which appears somewhat contrary to the drive to cut red tape.
The bill does, however, offer to reduce companies’ administrative workloads by allowing them to store certain information on the central public registry at Companies House instead of holding separate statutory registers, particularly in relation to PSCs, directors, members and secretaries. Once a company opts-in it is no longer obliged to maintain its own copy of the register(s) concerned, but the company will have to deliver all information to the Registrar that would previously have been entered in the register AND keep the old register (despite not having to update it), and so the benefit of opting-in appears rather minimal.
Alongside the proposed information collection and maintenance changes, the bill also amends the statutory filing regime. Notably, the bill proposes that the annual return be scrapped in favour of a “confirmation statement”, through which a company confirms to Companies House that it has delivered all of the information that it was required to deliver for the 12-month period to which the statement relates. Despite the name change, the confirmation statement bears more than a passing resemblance to current annual return regime and companies will still have to confirm details relating to their registered office, officers and shareholders and provide information in relation to their principal business activities, capital and the admittance of shares to trading (if applicable).
In addition to the above changes to company information administration, a number of other measures are proposed by the bill, including:
(a) the removal of the requirement for a director formally to consent to act. Instead, companies will be obliged to make a statement confirming that consent has been given;
(b) the removal of the requirement to disclose the amount paid up on each share (either at incorporation or in subsequent filings);
(c) the banning of bearer shares;
(d) the banning of corporate directors;
(e) the application of the general duties of a director under the Companies Act 2006 to shadow directors; and
(f) changes to the rules governing the disqualification of directors.
In summary, the current draft of the bill proposes to make a number of alterations to the current system of statutory registers and Companies House filings with a view to lessening the administrative burden on companies. In practice, however, the changes proposed may turn out to be largely superficial and, far from reducing red tape, in some cases increase the workload faced by compliant companies.
Please contact Daniel Wingfield if you would like to discuss any of the issues raised in this article. The information provided in this article is for general information purposes only and does not constitute legal or other professional advice and cannot be relied upon as such. Any law quoted in this article is correct as at 27 July 2014. Appropriate legal advice should be sought for specific circumstances before any action is taken. Copyright © Murrell Associates Limited, July 2014.