Today on Bank Holiday Easter Monday, the Government announced some changes to company regulations. Does this show how they work all the days of the year to improve the UK business environment, or they thought it a good time to announce controversial proposals? You can judge for yourselves the answer to that question after reading what follows. But as most of the proposals were well flagged in advance by past public consultations, they may only be controversial to those companies who have more work to do as a result.
The announcements are contained in two documents available from the BIS Department’s web site under the titles of “Company Filing Requirements – Red Tape Challenge” and “Transparency & Trust: Enhancing the Transparency of UK Company Ownership and Increasing Trust in UK Business“. They follow previous public consultations to which ShareSoc responded.
Most of the proposals only affect private companies registered in the UK rather than publicly listed companies so I will summarise them in brief.
Company filing requirements will be simplified. For example the need to file an Annual Return at a set point in the year will be dropped. So if any other changes are made (such as the appointment of a new director), you will simply be able to confirm other information held by Companies House is still correct at the same time. There will be more checks on new directors to confirm they have agreed to be appointed and there will be more emphasis on electronic communication (a company’s email address will also be recorded).
Those who own or control more than 25% of shares in a UK company or limited liability partnership as a “beneficial interest” (i.e. via a nominee or trust) will need to be recorded on a publicly available register at Companies House. However public companies who already disclose ownership under the FCA’s Disclosure and Transparency Rules or other similar regulated market rules will be exempt. Companies will likewise have to maintain a register of such beneficial owners.
Note that ShareSoc’s response to the consultation suggested that everyone hiding behind a nominee name should disclose their interest, so it is disappointing that only those holding more than 25% will be affected. With enforcement of disclosure also currently weak, and not likely to improve, this may not help much to improve the transparency of ownership in public companies. In addition it might simply encourage registration of companies in jurisdictions such as the Cayman Islands and Bermuda where transparency is negligible.
Bearer shares will be prohibited, with existing such shares converted to registered shares over a period of time. Corporate directors will also be banned, although there will be some exceptions to that rule. The rules for the disqualification of directors will also be toughened.
The new rules are intended to tackle tax avoidance and the evasion of legal responsibility by avoiding traceability of ownership. They may go some way towards ameliorating those problems, and therefore must surely be generally welcomed.