Company ownership: transparency and trust
In 2013 the government consulted on two separate, but related matters, Transparency and Trust and the Company and Commercial Law Red Tape Challenge. The responses from these discussions are now encapsulated within the proposed legislation introduced into Parliament in June as The Small Business, Enterprise and Employment Bill 2014-15 (the Bill).
The Bill is in part designed to encourage businesses to grow and to provide an environment that will increase confidence in the UK as being a good place to do business. The Bill will impact other issues, such as employment, insolvency and access to finance.
Vince Cable, Secretary of State for the Department of Business, Innovation and Skills said -
"The new legislation will bring about crucial change in the way UK companies operate to ensure that our companies are trusted and transparent, so they cannot conceal ownership or control and that they engage in good corporate behaviour"
The proposals will introduce some of the following changes:
- A requirement for companies to maintain a Register of People with Significant Control (someone who owns or controls more than 25% of a company's shares or voting rights or who otherwise exercises control over a company) – this must be made public at Companies House.
- The use of bearer shares (or share warrants to bearer), which have sometimes been exploited to disguise beneficial ownership, will be abolished.
- The use of corporate directors will no longer be permitted in most circumstances and all directors will have to be natural persons.
- The legal duties which apply to shadow directors will be updated and made clearer.
- Streamline company registration so that by 2017 those wishing to set up a company can do so simultaneously with registering with HMRC for tax purposes.
- A statutory definition of small and micro business will be introduced so that smaller business are not unduly burdened and can be exempted from some of the provisions of secondary legislation.
- The annual return is to be abolished in favour of the annual confirmation.
- Private companies will be able to keep information on the public register rather than maintaining their own registers.
- Simplification of statement of capital, directors' appointments and new means of resolving disputes about directors' appointments.
- New process to correct details and disputes on the registered office address to avoid use of sham addresses.
- The length of time to strike off a company will be reduced from six to as little as two months so that Companies House register remains accurate as to the status of a company.
- Companies will be able to make additional information available on the public register if they wish.
Companies House also plans to make all of its digital data available for free from the second quarter of 2015. This will make the UK the first country to establish a truly open register of business information. This is a considerable step forward in improving corporate transparency.
The Bill is moving through Parliament and it will next be considered in a Public Bill Committee which is expected to report back in November 2014 – so watch this space!