Revisiting who owns your business: SBEE Act and PSC Register updates
The Small Business, Enterprise and Employment Act contains a number of measures which represent significant change for companies. The aim is to increase trust in UK businesses and improve the transparency of their ownership and control and in turn it will help combat tax evasion, money laundering and terrorist financing. All companies will be affected in one way or another as some of the changes are to your legal requirements, and what you file with Companies House, so your systems and processes will need to be updated to reflect the changes. In this article we will explore what has come into force so far, what this means to you, what is still to come and how you can prepare.
What’s happened so far?
In October 2015, a series of changes came into effect. Firstly, directors’ days of birth, appearing on public records such as Companies House, are now suppressed; directors still need to provide the information but for added protection it won’t be shown in full, going forward. Other changes see the timescales for accelerated strike-off reduced to 2 months, if there is no objection. This means it is even more important to keep your company records up to date, but on the bright side, if you are waiting for a company name to become available, this might happen earlier. New offences that amount to directors’ misconduct for which individuals can be disqualified were added: ‘disqualification for certain convictions abroad’ and‘disqualification of persons instructing unfit directors’, to name a few.
Signatures on paper forms and personal authentication has been replaced by a checkbox where companies are required to agree with a statement that newly appointed officers have consented to act in their relevant capacity. This was a precursor to the recent changes in April 2016 and allows appointed directors who didn’t consent to act to apply for the notification of their appointment to be removed from the register and the company will need to provide evidence; this is a simpler way to get falsely appointed directors’ details removed from the register.
April 2016 also saw updates to the dispute process over registered office addresses. This aims to help companies when their address is being used as a registered office without authorisation. If the registrar is satisfied it is being wrongly used, the address will be changed to a default address (nominated by the registrar) and any correspondence will be held there which will encourage companies to keep on top of their company records to avoid this.
One of the most significant changes as a result of the Act is the implementation of the PSC (people with significant control) register. From 6 April, all Companies, LLPs and SEs (Societas Europaea) are required to keep a PSC register.
So, what is a PSC? 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
What is to come?
In addition to the 6 April PSC register changes, further provisions will come into force today, 30 June 2016, requiring this PSC information to be filed at Companies House as part of a ‘confirmation statement’ which is replacing the annual return from this date. The idea here is to ‘check and confirm’ the company information and notify Companies House of any changes. There is a charge attached, but you can change your record as many times as you like and only get charged once per year. If your company was incorporated before 30 June 2016, you need to provide the PSC information in your first confirmation statement; and new companies will provide this information on their incorporation documents.
Changes to the statement of capital see it simplified; removal of the requirement to show the amount paid up and unpaid on each share and replacement with the aggregate amount unpaid on the total number of shares will be more useful for shareholders and creditors as it shows money which is still due to the company. This will also fit in with the ‘confirmation statement’ as you can simply state that there have been no changes, but you will still need to provide a full statement of capital where changes have been made during the year.
To really hammer home the aim of the Act, corporate directors will be abolished (likely from October 2016) as there is concern that corporate directors can be appointed to hide the identity of those individuals with control over the company, perhaps as a vehicle for illegal activities. Needless to say, exceptions are expected but the scope of these is yet to be published, and this change has already been deferred by 12 months. There will also be a one year grace period, so existing corporate directors will not need to be replaced until October 2017.
These changes will hopefully make the process slicker and help prevent tax evasion and money laundering activities but will require you to revisit who owns your business. You may choose to take a wider look at this area of your business and consider your Shareholder relations; we specialise in Corporate and Commercial Law and frequently help business owners in this area including negotiating and drafting Shareholders’ Agreements and setting up more effective share arrangements from the default option, providing added flexibility and certainty around how the company’s shares are to be dealt with in a variety of situations.
If you would like to discuss these changes or for an initial consultation on your Shareholder relations and how we might be able to help, please call our Corporate Team on 01935 385963 or [email protected]
This article is intended for general information purposes only and does not intend to provide legal advice and should not be used as such. As every matter is different, if you would like specific advice about your own circumstances, please contact us direct.