Small Business, Enterprise and Employment Act 2015

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The Small Business, Enterprise and Employment Act 2015 (the “Act”) achieved Royal Assent in March this year, and will be implemented gradually over the next 15 months, currently in six stages.

The premise of the Act is to reduce the hurdles encountered by most small businesses in their endeavour to innovate, grow and generally compete; thereby rendering the UK to be a more appealing place to start, and build, a business.

Stage 1 was implemented in May and saw the abolition of bearer shares and clarification of shadow directors and their duties.

What do you need to do?

If your company has any bearer shares in issue then there is a nine month surrender and conversion process to cancel the shares. If they are not surrendered by 26 December 2015 then any dividends should be paid into a separate bank account. If the shares are not surrendered by 26 February 2016 then companies can apply to court to cancel those shares. If this applies to your company you should act in advance of these deadlines and start to communicate with the holders of those bearer shares now.

Consider if you have any people within the company that would be deemed to be shadow directors, as the changes will increase their accountability as the general duties of directors will apply to shadow directors.

Stage 2 will be taking effect in October and will see the removal of a director’s date of birth from the public register. There will also no longer be the need for a new director or company secretary to formally consent to their appointment and instead the appointment form will contain a statement by the Company that the new officer has consented to act and Companies House will write to that new director to make them aware of their appointment.

What do you need to do?

As the company needs to make the statement it may still wish to obtain something signed from the person being appointed that they consent to the appointment, as supporting evidence.

Stage 3 will take effect in December and there will be new procedures to make it easier for incorrect appointments of directors to be removed from the register, and a new process will be in place where a company is using a registered office address but is not authorised to use it.

What do you need to do?

Ensure the company’s registered office is correct.

The Act tables a number of reforms to the Companies Act 2006, particularly with regard to increasing levels of transparency surrounding who ultimately controls UK companies. Of note is stage 4 which is due to take effect in April 2016 which is the requirement on companies and LLPs to keep a public register of people with significant control ("PSC") over the company ("PSC Register").

Under the provisions, a PSC is an individual with significant control over a company who meets one or more of the 'specified conditions' namely:-

1. they directly/indirectly own more than 25% of the company's shares;

2. they directly/indirectly control more than 25% of the company's voting rights;

3. they directly/indirectly have the right to appoint or remove a majority of the company's board of directors;

4. they exercise/have the right to exercise a significant influence or control over the company; or

5. they exercise/have the right to exercise a significant influence or control over activities of a trust or firm which, itself, has met one of the first four conditions.

The PSC Register should detail the particulars of all PSC's who are 'registerable' (which is any individual who holds a direct interest in the company, which is not solely the result of their significant control over another legal entity), along with the requisite details of relevant registrable legal entities (a body corporate or firm being a legal person under its governing law, who would have been a PSC had it been an individual, and is subject to its own disclosure requirements).

The PSC Register must be available for inspection at the company's registered office or SAIL (single alternative inspection location), although private companies have a further option of keeping their PSC information on the public register at Companies House as opposed to a separately maintained PSC Register.

From January 2016, it will be a legal requirement for companies to hold their own PSC Registers, and from April 2016 this information will need to be provided to Companies House when companies file their confirmation statement (the replacement to  the annual return).

What do you need to do?

This means that in the future, both private and unlisted public companies with nominee shareholders may be required to record details of the beneficial owners under nominee arrangements in their PSC Register. Start to determine now whether any of your shareholders fall within the PSC category and consider the fact that their personal details will become public record.

Stage 5 is set to come into effect from June 2016 and will see the abolition of the annual return and the introduction of a ‘check and confirm’ system which will see a confirmation statement being filed by a company every 12 months detailing any changes. Statements of capital will also be simplified. A company can also elect not to have separate statutory registers but to maintain them at Companies House.

What do you need to do?

Companies should consider whether they wish to maintain their own statutory registers and keep information off the public register.

Finally in October 2015 stage 6 will see a prohibition on the appointment of corporate directors and all existing corporate directors will automatically cease to be a director one year and one day after it comes into effect.

What do you need to do?

Consider if you have any corporate directors appointed within the company. There will be some exceptions to the rule but these have not yet been determined. Therefore it is recommended that consideration is taken in advance as to whether a corporate director should be replaced with an individual.