CJCH Newsletter June 2016

Posted by: CJCH Solicitors | 13th June 2016


Corporate and commercial law update

Small Business, Enterprise and Employment Act 2015 (the “Act”)

Parts 7-10 of the Act affects existing legislation governing how companies and limited liability
partnerships (“LLPs”) should be organised and administered, with far-reaching consequences. The
purpose of introducing the Act is to encourage greater transparency of company or LLP ownership and
control, reduce bureaucratic burdens on companies and to better protect against UK entities being
used as a vehicle for criminal activities.

Amendments to date

Some parts of the Act have already been implemented; the key changes for SME business owners are
set out here.

Shadow directors

Directors’ statutory duties have been extended to shadow directors. This means that any person
acting as a director in all but name will be considered for all intents and purposes as a full officer of
the company. As such, the shadow director will be required to demonstrate with the general duties
of directors set out in sections 171-177 of the Companies Act 2006 (“Companies Act”).

Director birth date suppression

Directors have previously had their residential addresses, full names and dates of birth available for
view by the public at Companies House. To reach a balance between transparency and confidentiality
of personal data, this has since changed; firstly, in 2009 when the Companies Act was amended to
allow suppression of a director’s residential address (unless a director provides this as their address
for service) and secondly, since 10th October 2015, by partial suppression of a director’s birth date by
anonymising the exact day (for example, the register will show **/01/1971 for a director with a birth
date of 1st January 1971.)

Officers – consent to act and director disputes

The appointment forms for directors and secretaries have been amended so that the company must
check a box confirming that the newly appointed director and/or secretary has consented to the
appointment which replaces a requirement for the officer to either execute the form in order to
demonstrate his consent or to provide a personal electronic authentication.

An additional measure is provided for in the Act to safeguard against a situation arising where a
director is not aware that their appointment to a company has been made. The Registrar will notify
the newly appointed director by a notice which may be sent to any address the company has provided
for the director, including an electronic address.

The company will also need to be able to demonstrate that the officer has consented to the
appointment in the event of a dispute.

Accelerated company strike-off

This measure is intended to reduce the time taken so companies can be struck off the Register more
quickly. The Registrar can remove companies from the Register where it appears that the company is
not carrying on a business. Under the new provisions contained in the Act, the Registrar will be able
to remove a company from the Register in approximately 3 and a half months from start to finish,
reduced from approximately 6 months.

The procedure is that the Registrar will send a notice to the company, allowing 14 days to respond. If
no response is received, a second notice is sent advising that the company will be struck off and
allowing a further 14 days to respond. At the end of this period, if no response has been received the
Registrar may file a notice at The Gazette advising that the company will be struck off from the Register
in 2 months’ time. The company is dissolved from the date of The Gazette notice.

The effect of this is that existing company names will be available slightly quicker, creditors will need
to ensure that they object to a strike off notice within the 2 month time-frame after the date of The
Gazette notice and companies which do not respond promptly to requests from the Registrar may find
themselves caught up in the strike-off process.

Voluntary strike offs will also be carried out one month more quickly, since the time frame for The
Gazette notice is reduced from 3 months to 2 months.

People with significant control (“PSC”)

Since 6th April 2016, it has been a requirement for all companies and LLPs to maintain a register of
people who have significant control over the company. The company must make the register available
for inspection at the company’s registered office address (or in certain exceptions, a specified different

A person, or a company, or a LLP or Societas Europaea is identified as a PSC if any of the following
apply to them:-

– 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 over the company; and
– Holds the right to exercise or actually exercises significant control over a trust or company
that meets one of the first 4 conditions.

The company has a duty to find out and identify whether there is anyone who is a registrable person
or a registrable relevant legal entity who may be a PSC.

A notice must be sent to each potential PSC requesting confirmation that they are a PSC in respect of
the company and asking the PSC to provide their particulars for the register. The addressee will have
one month to comply with the requirements of the notice. The company does not need to send a
notice where the company is already aware of a PSC and holds relevant information on them, such

information having been either provided by the PSC or, in the case of an individual by someone else
with the PSC’s knowledge.

The company must keep the PSC register up-to-date and review it regularly. Failure to do so is an
offence by both the company itself and all officers of the company who are in default. A person guilty
of complying with information duties may be liable on summary conviction to imprisonment for up to
twelve months and/or a fine.

A duty to supply information also falls on a person who knows that they are a PSC or ‘ought reasonably’
to know that they are a PSC in respect of a particular company. Such a person has one month to
provide all the information to the company after becoming aware of the PSC Register and that they
may be required to enter their details on it. In addition, a PSC must update the company if any changes
occur which may require amending the PSC Register.

If a company is concerned that the PSC identified could be at risk of abuse (for example, where the
activities of the company result in activists targeting people connected to the company), then it is
possible to request protection from having the details available in the public domain. This exception
is only likely to be available in serious cases.

Upcoming changes from 30th June 2016

Confirmation statement

The requirement to file an annual return will be replaced with a requirement to file a confirmation
statement instead. If no changes have occurred during the year, the company will only need to check
and confirm that the information held at Companies House is correct and pay the accompanying fee.

Statement of capital

The statement of capital has been simplified so that only the aggregate amount unpaid on the total
number of shares is required, replacing the requirement to show the amount paid up and unpaid on
each share. This will make it easier for shareholders and creditors to ascertain how much money is
due to the company.
With the new confirmation statement, where applicable it is possible to check and confirm no changes
have occurred to the statement of capital during the year.

PSC Register

For this first year of the new confirmation statement procedure, it will be necessary to notify
Companies House of all people who have significant control over the company as it is a filing
requirement after 30th June 2016.
The company may not leave the filing sections for a PSC empty – it is a criminal offence not to provide
the information. If the company is unable to identify the PSC(s) or does not have one, information
must still be filed to reflect this.

Centralise registers

Companies can opt to keep certain information on the public register rather than hold their own
statutory records. This includes:-
– Register of members
– Register of directors
– Register of secretaries
– Register of directors’ residential addresses
– Register of people with significant control

This alleviates the requirement to update two separate records, Companies House and the company’s
own statutory records. However, if a company opts in to centralise its registers, any information
contained in the statutory records becomes available to view online at Companies House. For
example, shareholder addresses and directors’ full date of birth will be available to view on the public
record instead of being suppressed.

If a company later opts out of centralising its registers, then the information that was placed on the
pubic record during the time that the company had opted in will still remain available to access from
the Companies House website thereafter.

In the event that an error was recorded in one of the registers, for example, a director was mistakenly
appointed and later his appointment terminated; the error and rectification will still continue to show.

Upcoming changes – October 2016

Corporate directors

All directors must be natural directors, unless an exemption applies. The Act allows twelve months
for companies to remove and appoint new directors to replace any corporate bodies acting as
directors, with the time frame for doing this expiring in October 2016. The exemptions are limited to
large listed group structures or large private companies and charities.

How we can help

CJCH Solicitors have a team of corporate commercial solicitors dedicated to help SMEs in a number of
business areas including mergers and acquisitions, business disposals, purchasing or leasing of
commercial property, general commercial contract work, commercial dispute resolution and company
administration work.
In relation to the changes brought in from this Act, we can assist you with the following:-

– Understanding the above legislative changes and how they affect you and your company;
– Advise how to implement changes in your company management, structure and/or recordkeeping
to meet the legislative requirements;

– Assist with identifying people with significant control over your company and obtaining and
compiling information on them;
– Assist with the management of company statutory records and filing requirements at
Companies House; and
– Carrying out a general review of directors’ duties to better enable your directors to fulfil the
role effectively.

We hope this newsletter has been useful and please do not hesitate to contact the Corporate
Commercial Team for further information or assistance. Our telephone number is 029 2048 3181,
please ask for Marcus Brace or Amy Lapsevska. Alternatively, you may email the Corporate
Commercial Team direct at:

By Amy Lapsevska