On 26th March 2015, the Small Business, Enterprise and Employment Act received royal assent. This Act aims to encourage more SME start-ups by reducing the barriers that they face in their drive to innovate, grow and compete. How does this affect you? You may be surprised!
Small and medium sized enterprises make up 99% of all businesses within the UK. The North-East has had one of the largest increases in SME start-ups in recent years! So this new Act will be very influential.
Although the Act came into force in March 2015, its provisions are being implemented in a staggered approach.
Here are some of the main provisions contained within the Act:
This is a requirement for all companies to identify anyone within their company who has significant control and to then register this at Companies House. You will also need to keep a ‘People with Significant Control Register’. This will be publically available.
- Significant control: is when someone
- directly or indirectly holds more than 25% of the nominal share capital; or
- directly or indirectly controls more than 25% of the votes at general meetings; or
- directly or indirectly is able to control the appointment or removal of a majority of the board; or
- actually exercises, or has the right to exercise, significant influence or control over the company; or
- actually exercises or has the right to exercise significant influence or control over any trust or firm (which is not a legal entity) which has significant control (under one of the four conditions above) over the company.
- Enforcement: A set of regulations have been published, alongside a consultation. We expect the provisions to come into force in April 2016. From June 2016, companies can choose to keep their register at Companies House.
- Aim: one of the key aims of the Act was to improve the transparency of ownership and control of businesses. In turn this was hoped to increase the trust in UK businesses and encourage more people to start-ups.
Simplification of the filing regime
Companies used to have to file an annual return with the Registrar of Companies on a set date each year. This relayed detailed information about the company such as its shareholders and share capital, but it tended to duplicate information which had already been given earlier in the year. Companies will now have to submit a confirmation statement instead.
- Confirmation statement: Companies will not have to give duplicate information. Instead they will just have to give a confirmation that this information has previously been delivered to the Registrar as requested during the year or is being delivered with the confirmation statement.
- Enforcement: This will come into force in June 2016. No set date on which the statement needs to be made, but companies will be expected to file one at least every 12 months. The new statement will detail any changes made since the last statement.
- Aim: Hoped that it will reduce the administrative burden on companies.
Directors (including shadow directors)
- Shadow directors: Shadow directors will have the same general duties as appointed directors.
- Aim: to improve the standards of a shadow director to increase their accountability where certain standards are not met.
- Enforcement: May 2015.
- Definition of a shadow director: this has been changed by the Act. The previous definition provides that a person who gives advice in a professional capacity is a shadow director. This has been extended. It now includes that advice or guidance, directions or instructions given in the exercise of a function conferred by or under legislation is sufficient to satisfy the definition of a shadow director.
- Aim: To ensure that those posing as a shadow director are now covered by this definition.
- Enforcement: May 2015
- Directors’ Day of birth: Directors are no longer required to include the day of their date of birth on the company’s public register of directors. But, the company is still required to send these details to the Registrar. The month and year will still be available for inspection, but not the date.
- Aim: To give directors more privacy
- Enforcement: October 2015
- Consent to act as a director: Previously for someone to act as a director or secretary they needed to provide a ‘formal consent to act’. This was done by signing a paper form or via personal authentication or an electronic filing system. This has now been replaced with a statement.
- Statement: When a director is appointed Companies House will add a statement that the person has consented to act as a director to the relevant appointment and incorporation forms. The company will then have to consent to this statement. Companies House will then write to all directors to make them aware of this new appointment and that it has been registered at Companies House. This makes the new director aware of their statutory duties and gives them a chance to object if they did not consent.
- Enforcement: October 2015.
- Corporate Directors: Normally a UK company must have at least one natural person as a director and could appoint corporate bodies as other directors. This will no longer be allowed.
- Enforcement: This provision will come into force in October 2016, subject to further consultation. Existing corporate directors will cease to be directors a year after the provisions have come into force.
These issues will affect any company which falls into the bracket of a small or medium sized (or even micro) enterprises, In reality, this accounts for most of the businesses in the UK. So it is likely that if you are a company and are reading this, these changes will affect you!
This blog post was written by Emma Stamp. Emma is an MLaw student at Northumbria University, working with the Business and Commercial firm at the Student Law Office. On graduation she hopes to secure a training contract with a firm that specialises in clinical negligence. Outside of University she enjoys baking, yoga and reading.