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New law: Companies preparing for significant company law changes

12th May 2015

Companies are preparing for significant changes to company law from April 2015 through to 2017, by checking which parts of the new law apply to them, when each rule is due to come into force and what they need to do now.

Companies need to start preparing for significant changes under new company law coming into force over the next few years, many of which are designed to improve disclosure and transparency by UK companies

Register of Persons with Significant Control (PSCs)

From January 2016 every UK company limited by shares or guarantee (except public companies already subject to the listed company Disclosure and Transparency Rules) must maintain a PSC register giving details of people with significant control over the company.

This means any registerable individual (or in some cases, any 'registerable relevant legal entity') with an interest in more than 25 per cent of the company's shares or voting rights, or who otherwise exercise significant influence or control over the company or its board.

Companies have a duty to take reasonable steps to identify those persons it knows or suspects have significant control over it. Companies should ensure they develop procedures for doing this – including identifying provisions in agreements with third parties which may mean those third parties are PSCs. Individuals and entities with significant control must also identify themselves to the company.

From April 2016 information about PSCs must be filed at Companies House on the new annual confirmation statement, which will replace the annual return.

Corporate directors abolished

Corporate directors (when one company is a director of another) will be prohibited from October 2015, with a 12-month transitional period for existing companies which already have corporate directors. The new rules will apply even if the company's articles allow corporate directors, and whatever the articles say about the quorum at directors' meetings.  Companies should review their articles. There will be exceptions when corporate directors will be allowed - the government is still consulting on what these will be.

Bearer shares abolished

Bearer shares will be prohibited from 26 May 2015 (with a nine month transitional period for companies to replace existing bearer shares). Bearer shares are rare in UK companies – companies affected by this change will know who they are.

Annual returns replaced

Annual returns will be replaced by annual 'confirmation statements' from April 2016. Companies will need to review their procedures and, if they use secretarial software, that it can cope with the new statements.

The 'central register'

From April 2016, private companies will be able to elect to keep their statutory registers (including the new PSC register) at Companies House on a 'central register', instead of keeping their own registers. However, this will make more information available to the public than if they keep their own registers.

New liabilities for directors

The new law also significantly extends the grounds for disqualifying directors, including taking their conduct in relation to non-UK companies into account.  It also increases their liability on insolvency generally.

Directors' consents to act

From October 2015, directors no longer need to provide consent to act on appointment. Instead, Companies House will write to new directors notified to it by companies, and alert them to the notification. If the director does not consent they can object to Companies House.

Statements of capital

The statements of capital on certain Companies House forms will be simplified from April 2016.

Unauthorised registered office

From April 2016 Companies House will be able to change the public record if it can be shown that an address is being used as a registered office address without authority from the owner of occupier.

Operative date

  • From now

Recommendation

  • Companies should take advice on which parts of the new law apply to them, when they are due to come into force and what they need to do.