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Company law changes in June 2016


The Small Business, Enterprise and Employment Act 2015 is bringing in a number of company law changes. Harrison Drury’s Brett Cooper looks at what businesses need to do to ensure they’re compliant from June 2016.

Following a government initiative to increase simplification and transparency of company administration, the Small Business, Enterprise and Employment Act 2015 was written into law and is undergoing a staged introduction.

In June 2016, the biggest changes for companies occur, with the requirement for filing of Persons of Significant Control registers (PSC), the abolition of Annual Returns and the changes to company registers coming into force.


From June 2016, the obligation to submit Annual Returns will be replaced with a requirement for companies to file a confirmation statement, to declare that all information which should be filed at Companies House in the period covered by the statement has been filed.

This includes events such as amendments to the share capital, articles of association, appointment or removal of directors. The confirmation statement must be submitted at least every 12 months, and must be filed within 14 days of the date of the statement (halved from the current 28 days).

To make the process simpler, where a company has not altered its share capital in the 12 months covered in the confirmation, companies will no longer be required to complete the statement of capital and would simply need to declare there has been no change.

In addition to the replacement of Annual Returns, the 2015 Act gives companies the option to elect to hold certain statutory books in the public register at Companies House. These registers include, the registers of Members, Directors (and their residential addresses), Secretaries, and the new PSC register.

For new companies formed after the 1 June 2016, the subscribers can elect to use the public registers on incorporation. However, for existing companies, the full consent of company shareholders must be obtained before this can be used.

While this initiative is likely to be popular, it is worth noting that where the current public registers in their current form do not contain the residential addresses of members or the full date of birth of directors, this information would become part of the public record if the company opted to use this register service. Where a director is also a shareholder of the company, their personal address and date of birth would be available for all to see.

Person with Significant Control Register

Perhaps the biggest change from the 2015 Act is the introduction of a requirement on companies to keep a person with significant control register (PSC register). Individuals might have traditionally owned or controlled a significant part of a company through the use of nominee shareholders.

However, the 2015 Act has ensured that where people (including companies for this purpose), hold a certain amount of beneficial interest, as opposed to legal and registrable interest, they must declare this in a company PSC register. It has recently been confirmed by the government that this extends to those with an interest Limited Liability Partnerships as well.

People who need to be referred to in the register are those who:

  1. Indirectly or directly hold more than 25% of the shares in the company;
  2. Indirectly or directly hold more than 25% of the voting rights in the company;
  3. Indirectly or directly hold the right to appoint or remove a majority of the board of directors of the company;
  4. Have the right to exercise, or actually exercise, significant influence or control over the company; or
  5. Have the right to exercise, or actually exercise, significant influence or control over the activities of a trust or firm whose trustees or members would meet any of the above specified conditions (in their capacity as trustees or members) in relation to the company, or would do so if they were individuals.

It is very clear from the supporting guidance which has been issued that there is a focus on companies to be extra vigilant with parties exerting influence or control over the company. The 2015 Act contains clear duties on the company to search for any person with significant control and any parties who consider themselves to be a person with significant control to declare themselves as such.

The Act also imposes sanctions on such companies and persons for failing to comply with their duty of search or disclosure.


Another area within which the 2015 Act aims to increase transparency is the regulation of company directors. A ‘shadow director’ is someone who for all intents and purposes acts as a director of the company, though chooses not to be formally appointed, and instead directs the formal directors of the company from the shadows.

Until recently, shadow directors were able to exert this control on companies without any formal recognition or responsibility. The 2015 Act changes this in two ways. Firstly, by exerting such control, the shadow director falls under the definition of a PSC, and therefore is liable to appear on the PSC register, which formally sets out the level of his input in the company.

Secondly, the Act extends the general duties of appointed directors under sections 171–177 of the Companies Act 2006 to shadow directors. These include the duty to promote the success of the company, exercise independent judgement and to act with reasonable skill, care and diligence. By introducing this regulation on shadow directors, it is hoped that company activity will become more transparent.

Finally, one of the last changes to be staged into force is the removal of all corporate directors. Under the current system, any legal body is entitled to hold office as a company director. This includes both human and corporate beings. However, an appointment of the latter means that the person ultimately controlling the post of director is not immediately clear, and therefore from October 2016, the government will place a blanket ban on these types of directors.

While companies will no longer be able to appoint corporate directors from October 2016, the government has allowed for a 12 month transition period. Provided all goes to plan, from October 2017, any remaining corporate directors will cease to hold office.

It is advised that companies look into their register of directors as soon as possible though, as if they contain any corporate directors, negotiations will need to be held with the company to determine who, and how many, people will join as individuals. Depending on the result of these negotiations, this could clearly impact the voting power of individual directors in a company.

For more information on the changes to company law, or any other corporate legal matter, contact Brett Cooper on 01772 258321.

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