Thursday 29 January 2015

Disqualification Following Convictions Abroad

This is part of a series of blogs on the Small Business, Enterprise & Employment Bill (“the Bill”) that is proposed to come into force in April 2015.


The Bill has introduced new dimensions into director disqualification, in terms of an individual being disqualified from acting as a director as a result of non-UK convictions. This only applies to convictions which are comparable to indictable offences in the UK. An indictable offence is a criminal offence that can be tried in the Crown Court (rather than a less serious summary offence, which is normally considered in the Magistrates Court).

This presents an entirely new range of disqualification claims which may be made by the Secretary of State against directors, in a similar way to current disqualification claims, solely on the basis of non-UK offences. This will obviously present difficulties in defending such claims, collating the evidence in answer, dealing with technical aspects relating to the original jurisdiction and human rights aspects.
The proposed amendment also provides for individuals to offer disqualification undertakings upon receiving notice of such steps (usually with a view to avoiding legal costs).
This will have incredible consequences for UK directors who may be involved in international companies and who may now be potentially disqualified despite having a clean record in the UK.
Should you require advice on this, or consider that this may impact on you or your clients, please contact Francis Wilks & Jones and we can assist by reference to our long history of dealing with director disqualification matters.



Thursday 22 January 2015

Dissolution/Striking Off Of Companies

Small Business, Enterprise & Employment Bill (“the Bill”) that is proposed to come into force in April 2015.

It is not uncommon for dormant or non-trading companies to be overlooked or company filing requirements not strictly adhered to, especially when the purpose for which they were set-up has not yet been finalised. Often, without close monitoring, the Registrar of Companies will seek to strike such companies off the register, effectively leading to a dissolution of the company and its legal title.

If a director continues to use such a company that fails to adhere to its filing requirements he can be prosecuted under the Companies Act 2006. Additionally, if the Registrar of Companies serves a notice of striking off of such a company from the register, then it may be the case that a director who continues to use the former company’s name will be personally liable for all contracts entered into and matters to which the company would have been liable (had it not been struck off).

Accordingly it is vital to ensure filings at Companies House are kept up to date, both to prevent any personal liability by directors but also to protect against the company being struck off.

Section 91 of the Bill seeks to shorten the notice period for the striking off of such companies, providing for the following amendments to the notice period provided to the company of striking off:

  • That the Registrar of Companies will decide to strike off a company if it does not receive a response within 14 days (rather than one month as currently required) of appropriate notice of striking off;
  • That the Registrar of Companies will publish a notice of striking off in the Gazette 14 days (rather than one month as currently required) after sending a second notice letter (if no response received);
  • That the Registrar of Companies will notify the company of an automatic striking off 1 month thereafter (currently three months).


The above amendments will provide for a striking off over a total period of two months, rather than 5 months as is currently the case (with the likely consequences as outlined above).

Should you require any advice or assistance with these matters, please contact Francis Wilks & Jones who can assist in this regards.

Tuesday 20 January 2015

Changes To Company Filing Requirements

Small Business, Enterprise & Employment Bill (“the Bill”) that is proposed to come into force in April 2015.

Part 8 of the Bill provides for an alteration to Part 24 of the Companies Act 2006 such that instead of filing an Annual Return, a company will only be required to file a statement confirming that all duties (to notify changes to registered office address, directors, company secretaries etc) have been adhered to and to file a Statement of Capital only where changes have occurred. These requirements are slightly expanded or altered in respect of listed companies and non-trading companies.

This is a useful amendment to the Companies Act legislation, as the filing duties have become onerous in recent years and we often see prosecutions and directors disqualified for failing to file a return which merely repeats what is already on the register. Conversely, there will still be a requirement to file an annual “Confirmation Statement” and the reduction in filings, which may lead to aged information registered at Companies House, will mean that it will become more difficult to place the blame on inaccurate or missing information.

These amendments also require that a company provide details of all individuals with “significant control” over the company and as stated in its “PSC register”. A previous blog in this series refers to these changes as a result of the government’s desire for increased levels of corporate transparency.

At Francis Wilks & Jones we can assist with advising on and making the necessary arrangements

Shadow Directors And Their Increased Responsibilities

This is part of a series of blogs on the Small Business, Enterprise & Employment Bill (“the Bill”) that is proposed to come into force in April 2015.

Section 251(2) of the Companies Act 2006 provides a definition of a shadow director of a company. A shadow director is not a director recognised on the Register of Directors in a company or listed as a director at Companies House, but nevertheless acts to instruct or direct directors in the management of the company and makes decisions critical to the company’s affairs.
Section 78(1) of the Bill seeks to incorporate a new Section 170(5) of the Companies Act 2006 such as to apply the duties of directors also to shadow directors. This is something that has been continuously present through the common law (especially in respect of proceedings brought for breach of fiduciary duties or misfeasance) but which now clarifies that shadow directors can be likewise personally liable for losses by the company.
Further, Section 93 of the Bill also provides that where a shadow director exercises a “requisite amount of influence” over a disqualified director, the shadow director may also be disqualified from acting as a director (with the appropriate criminal consequences for acting as a shadow director in the future as a result of the changes referred to in the last paragraph).
Quite often non-executive directors, either appointed or not appointed can fall into the category of shadow directors and thus any individual with influence over the company’s affairs may potentially be at risk as a result of this change. The proposed regulations do however make provision for professional advice and widens the exemption for professional advisers to ensure such individuals are not accidentally caught within these definitions.

Should you require further assistance or have concerns as to whether you may fall within the widened scope of the definition of shadow directors, with the consequential liability, or any other query in respect of the above matters please do not hesitate to contact Francis Wilks & Jones and we can assist with these matters.



Monday 5 January 2015

All Company Directors Must Now Be Natural Persons

This is part of a series of posts on the Small Business, Enterprise & Employment Bill(“the Bill”) that is proposed to come into force in April 2015.
Sections 76 and 77 of the Bill removes the ability to appoint corporate directors to the Board of Companies and insert a statutory requirement that ALL company directors must be natural persons. Section 77 requires that the Secretary of State review the effectiveness of this amendment at the end of 5 years beginning on the day when the Act comes into force and for future periods, at every 5 year stage.
The Bill provides that any appointment of a corporate director is void and accordingly this may have consequential effects on directors who resign and appoint corporate directors in their place. Such actions will effectively lead to a finding that the director has resigned and abandoned the company and therefore may have breached his/her fiduciary duties (with the personal liability that may arise from such breaches).
The Bill does provide the Secretary of State with a power to make exceptions from this rule but in the absence of any immediate regulations being incorporated the prohibition will continue.
This will obviously be greatly concerning to many companies and, to avoid the associated turmoil, the Bill provides that for the initial 12 months following commencement of the Act corporate directors can continue to act on behalf of a company BUT will cease to be directors on the expiry of this initial 12 month period.Accordingly, it is recommended that steps are taken immediately as the Act is anticipated to commence in April (2015).
This reflects the increased transparency sought by government and as a result of this and the change to the disclosure of beneficial owners it is anticipated that the use of companies as tax shelters, or as shelters for any other investment purpose may subside. However, I anticipate that in reality this will lead to the introduction of more complicated schemes being introduced to manage these changes.
If you require any assistance on the impact or effect of any of these changes, or indeed you require assistance in planning for these changes, then please contact Francis Wilks & Jones.