Transparency of UK company ownership: far reaching changes on the way

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

The Small Business, Enterprise and Employment Bill is currently making its way through Parliament. Of particular importance to UK companies and their shareholders are the provisions dealing with the transparency of company ownership. The proposed changes are far reaching and the Government has indicated its intention to pass the Bill into law in 2015. We summarise the key parts of the draft legislation, its implications and who needs to start preparing for its implementation.

In the summer of 2013, at the UK hosted G8 summit, the Government committed itself to implementing reforms designed to combat tax evasion, money laundering and terrorist financing by improving the transparency of company ownership and control in the UK. Following a consultation, the new Bill proposes the following key measures.

• A requirement for UK companies to maintain a new, publically accessible register of those individuals with significant control (broadly more than 25%) over its shares or management. General counsel and company secretaries will need to implement the new rules; beneficial owners will need to consider how their investments in UK companies will be disclosed. See here for our summary of the provisions and their implications.
• A prohibition on creating new bearer shares and the mandatory conversion or cancellation of existing bearer shares. Under the proposals, if bearer shares are not converted to registered shares within the limited window of opportunity provided by the legislation, companies will be required to apply to court to reduce their share capital and cancel them. For companies, this will have cost and possibly solvency implications and for the holders of bearer shares, there is the risk of losing the shares and their value if action is not taken within the timetable set out. See here for further details of the statutory timetable for conversion and the consequences of failing to do so.
• New provisions relating to directors, including a prohibition on appointing new corporate directors; the automatic termination of existing appointments of corporate directors; and the extension of directors' statutory duties to shadow directors. Companies with corporate directors will need to consider whether any additional individual directors should be appointed and if so, who. See here for more details.

Also included within the new Bill, and of particular interest to company secretaries and those involved in compliance and filing, are the proposed changes to annual return filings, the new ability for companies to keep statutory registers (such as the register of members) at Companies House and changes to statements of capital. We will cover this in greater detail once Companies House procedures and timings become available.

Any information contained in this article is intended as a general review of the subjects featured and detailed specialist advice should always be taken before taking or refraining from taking any action. If you would like to discuss any of the issues raised in this article, please get in touch with your usual Olswang contact. This article was included in our Olswang Corporate Quarterly Autumn 2014 publication.