Update on Company Governance
The Small Business, Enterprise and Employment Act arrived with little fanfare but there are points to note for the company secretary.
The Act hit the statute books quietly on 26 March 2015, just before Purdah and ahead of the General Election. Much of the Act has yet to come into force; this will be dealt with by enabling regulations.
As the title suggests, the Act covers quite a range of issues and its effect is not limited to just small organisations. We have separately identified a number of the key provisions as they relate to employment matters at Wrigleys' recent Employment Law Update Seminar for Charities, which takes place annually in June.
From a governance and company admin perspective, the following changes must be noted:
The Act introduces measures which are designed to strengthen rules to prevent individuals acting as directors where there has been previous misconduct.
Also, shadow directors are now formally subject to the statutory duties of director as set out in the Companies Act 2006.
The use of corporate directors is to be restricted. From some date, yet to be set, in 2016 all company directors must be natural persons and the appointment of a corporate director will be prohibited save for limited exceptions. A consultation on those exceptions recently closed and we await confirmation of the outcome.
Disclosure, Filing and Company Registers
The Act makes provision for various changes to simplify company disclosure and filing requirements. For example, the annual return will be replaced by a Confirmation Statement that the company has filed all required information.
Companies will soon have the option (i.e. not compulsory) of keeping more statutory information (for example, the Register of Members) on the public register rather than keeping and maintaining its own private records, with an increased capacity for electronic filing and simplified company registration.
The Act also requires companies to identify those persons with "significant control", i.e. an ability to exercise (alone or jointly with others) more than 25% of a company's voting rights or the right to appoint a majority of the board of directors. Companies will need to keep a People With Significant Control (or PSC) Register from January 2016 with that information filed, with Companies House for the public register from April 2016. There is currently a consultation on new PSC rules. Further details here.
There is a mix of increased and reduced bureaucracy, which will likely make little impact on a great many companies. One particular advantage for some companies limited by guarantee will be the option of holding statutory (in particular member) registers in the public domain; where incomplete member records can create significant administrative difficulties. The corporate director does still have a place and it is to be hoped that consideration of the merit of exemptions will continue to allow flexibility whilst ensuring transparency within group structures. However, it is questionable whether money-laundering and other concerns promoting transparency are proportionate to justify requiring the PSC Register to be in the public domain for small organisations.