Changes to the regulation of companies have been introduced by the Small Business, Enterprise and Employment Act 2015 (Act) and will now be implemented in stages from 26 May 2015. The Act is intended to improve corporate transparency and public trust in companies while also simplifying some of the regulatory burdens placed upon companies.
These changes will affect independent schools, academy trusts and other companies.
Many of the most relevant changes are not taking effect until later in 2015 and early 2016. However, we recommend that companies familiarise themselves with the new requirements in good time.
The key changes which will affect independent schools and academy trusts are below:
- Companies will have to maintain a register of persons who exercise “significant control” over the company. This is likely to affect academy trusts with an external sponsor, Diocesan education trusts and any academy trust or independent school with a small number of members. The requirement will also apply to any trading subsidiary.
- Companies will no longer be able to appoint corporate directors (although some form of exception for charitable companies has been mooted).
- Independent schools and academy trusts will no longer have to file an annual return at Companies House. The filing requirements for newly appointed directors are also simplified.
Persons with significant control
One of the main policy objectives of the Act is to improve transparency as to who controls UK-registered companies. The Act will therefore:
- require companies to keep a register of people with “significant control” over them (PSC Register), and to make that register available to the public;
- impose duties on companies to gather information, and obligations on others to supply information, to enable that register to be kept;
- give private companies the option of using an alternative method of record-keeping; and
- include provisions excluding certain material from the information available to the public.
A person with “significant control” is defined as an individual that (either alone or as one of a number of joint holders of a voting right) meets one or more of the following conditions:
- the Individual, directly or indirectly, holds more than 25% of the voting rights in the company;
- the individual has the right, directly or indirectly, to appoint or remove a majority of the company’s board of directors;
- the individual has the right to exercise, or actually exercises, significant influence or control over the company (to be defined further in guidance in due course); and
- the trustees of a trust have the same level of control as above over a trust which itself exercises significant influence or control over the company.
This means that (i) Academy Trusts with an external sponsor, (ii) Diocesan education trusts and (iii) independent schools and academy trusts with only a small number of members are likely to need to make entries in their PSC register. The same will apply to trading subsidiaries as they typically have a sole or majority shareholder.
It is expected that the requirement to collect information for the PSC Register will come into force in January 2016.
Prohibition on corporate directors
There will be a general requirement that all company directors must be natural persons. This means that the appointment of corporate directors will be prohibited unless the Secretary of State makes exceptions under regulations. The Department of Business, Innovation and Skills (BIS) is considering whether the use of corporate directors in charities could continue include where the corporate director is itself a registered charity.
The prohibition of corporate directors was originally intended to come into force in October 2015 but it may yet be delayed until 2016. There will also be a 12 month transition period, after which any remaining corporate directors who are not exempt from the general prohibitions will cease to be directors automatically.
Filing documents at Companies House
The Act aims to simplify the filing requirements for companies and to remove administrative duplication while also ensuring that publicly available company information is more accurate:
- From April 2016 there will no longer be a requirement to file an Annual Return. Instead every 12 months a company will need to file a “confirmation statement” at Companies House to confirm that the company has provided all the requisite information in the period or is being provided at the same time as the confirmation statement. This means that, if a company has made the necessary filings throughout the year, it would not be necessary to resubmit the same information already held on the register of companies. The duties to deliver information that are the subject of the confirmation statement include:
- details of a change of registered office;
- details of company registers relating to directors, company secretaries (if appropriate) and people with “significant control” (see above);
- any obligations that arise as a result of a decision by a company to keep any of its registers on the register of companies only (see below); and
- details of where a company keeps company records if it uses a single alternative inspection location.
- Companies will be able to opt to hold the certain information otherwise required for their statutory books on the register of companies only. This will also apply to the PSC Register and is due to come into force in April 2016.
- It will no longer be necessary for an individual to sign a form AP01 before it is sent to Companies House. Instead, companies will have to give notice to the registrar that an individual has become a director. The registrar will then write to the individual notifying him/her of the registration on the register of companies. If there has been an error, the individual may make an application for his/her details to be removed from the register.
Independent schools and academy trusts should familiarise themselves with the reforms and, in particular, think about who may be a PSC in relation to the company. It is hoped that the Government’s guidance will, once published, provide greater clarity and assistance.