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 ALLcompany 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.