Small Business, Enterprise and Employment Act 2015 :All Company Directors Must Now be Natural Persons
This is part of a series of posts on the Small Business, Enterprise & Employment Bill that has now come into force on 26 March 2015 following the grant of Royal Assent and is now the Small Business, Enterprise and Employment Act 2015 (“the Act”).
This series of posts is intended to update the readers of the key changes, which should radically transform the transparency of the marketplace as regards the operation, control, ownership and risk associated to limited companies in the UK.
We have not addressed all of the issues described in our previous posts, to avoid duplication, but would welcome any queries from the reader in this respect.
The commencement of these changes is different dependant on which part of the Act is being reviewed (Section 164 of the Act defines commencement) and we have highlighted below the relevant commencement dates. Where we below stated “to be announced” this means it has not yet come into force and will commence upon the making of a Commencement Order.
Thechanges as set out below will be extremely important to all directors, companies and individuals with business in the future and it cannot be emphasised too strongly how important it is that you are prepared for these proposed changes. At Francis Wilks & Joneswe can advise on all matters subject to these posts.
All Company Directors must now be natural persons – COMMENCEMENT ORDER TO BE ANNOUNCED
Sections 87 and 88 of the Bill removes the ability to appoint corporate directors to the Board of Companies and insert a statutory requirement that ALLcompany directors must now be natural persons. There is however a provision that enables the Secretary of state to make exceptions to this rule, but we presume this will largely be in respect of government institutions, companies limited by guarantee and not-for-profit organisations.
A breach of this, both by the appointing company, the appointed company (if one is wrongly appointed) and directors of both of these companies (including shadow directors) may make these companies/their directors liable to criminal proceedings. The sentence is limited to a fine. However, it is important to note that the existence of any such criminal proceedings may make directors unable to continue acting in that capacity or alternatively they could later be deemed in breach of their fiduciary duties.
The amendments (new Section 156C of the Companies Act 2006) do provide for current corporate directors. They can remain appointed until 12 months from the day that the Act comes into force, and so these corporate directors (in respect of all UK companies) must be removed no later than 25 March 2016.
If you require any assistance on the impact or effect of any of these changes, or indeed you require assistance in making these changes and advice on the consequences,then please contact Francis Wilks & Jones.