Small Business, Enterprise and Employment Act 2015: Insolvency

Insolvency Practitioners and amendment to D Report duties – COMMENCEMENT ORDER TO BE ANNOUNCED

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.

The changes 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 & Jones we can advise on all matters subject to these posts.

The Act has also now moved to increase the regulatory burden on Insolvency Practitioners and their report on directors’ conduct (which is usually a prerequisite before any disqualification proceedings are commenced).

In summary, and further to the previous blog, the changes as they affect IPs are as follows:

1. An immediate report on the director’s conduct must be prepared by the Official Receiver or Administrator/Liquidator (“the Office Holder”) to the Secretary of State at the date of insolvency OR at any time within a period “ending with that date”.
2. The report must be filed with the Secretary of State within 3 months or “within such longer period as the Secretary of State considers appropriate”.
3. There is an additional obligation to update this report should the Office Holder become aware of any material changes or new evidence which should have been included in the original report.
4. The initial conduct report is not required to be prepared and submitted by a second Insolvency practitioner appointment (for example where a liquidator is appointed after an administrator) unless new material comes to light which should have been included in the original conduct report.
5. This will no doubt theoretically increase the reporting duties of Insolvency Practitioners at a time when their fees are subject to criticism and closer review.

Obviously for both Insolvency Practitioners and Directors these changes will have a serious impact and should you require advice on these changes please do not hesitate to contact Francis Wilks & Jones.

Small Business, Enterprise and Employment Act 2015: Determining Directors’ Unfitness

Determining directors’ unfitness – COMMENCEMENT ORDER TO BE ANNOUNCED

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.

The changes 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 & Jones we can advise on all matters subject to these posts.

Section 106 of the Act makes further provision for increased transparency in companies by widening the matters which the Court may consider when determining whether a director is unfit, in respect of director disqualification proceedings.

The Courts may now have regard to matters connected to overseas company, where previously such matters were inadmissible in director disqualification proceedings. The Court must of course be persuaded that any involvement in these overseas matters comprised misconduct before it can make a finding that such misconduct merits a finding of unfitness (and therefore disqualification).

We suggest that the limitation of resources available to investigators will undoubtedly make such evidence largely unavailable in all but the largest high profile case, but this will really depend on the availability of evidence from these overseas events.

As stated above, these proceedings now equally apply to shadow directors.

At Francis Wilks & Jones we are specialists in director disqualification matters and should any of the above matters cause concerns please do not hesitate to contact us.

Small Business, Enterprise and Employment Act 2015: Disqualification Following Convictions Abroad

Disqualification following convictions abroad – COMMENCEMENT ORDER TO BE ANNOUNCED

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.

The changes 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 & Jones we can advise on all matters subject to these posts.

Section 104 of the Act has provided that in the criminal Courts, in a similar way as to how the Registrar of Companies may bring disqualification proceedings after a criminal conviction for failures to file accounts and returns, the Secretary of State may now issue disqualification proceedings for a disqualification order to be made if a defendant director has been convicted of offences overseas.

The convictions abroad must either relate to the promotion, formation or management of a company or comprise an indictable criminal offence, i.e. a serious crime (offences in the foreign equivalent of a Magistrates’ court do not count).

Additionally, there is the ability for the individual against who such disqualification is sought to offer a disqualification undertaking, thus avoiding any costs of the legal proceedings. This is particularly important as very recently the Ministry of Justice were considering increasing criminal victim surcharges and seminal costs orders in criminal proceedings (which historically were not high, usually around £120) to approximately £1,000.

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.

Small Business, Enterprise and Employment Act 2015 :Shadow Directors

Shadow Directors and their increased responsibilities – COMMENCEMENT 26 MAY 2015

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.

The changes 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 & Jones we can advise on all matters subject to these posts.

We refer to our previous blog which outlined how a shadow director is defined under Section 251(2) of the Companies Act 2006. The previous definition has now been amended by Section 90 of the Act but seeks to carve out any such definition in respect of advisors (e.g. accountants) and instructions/guidance given by a representative of government.

Section 89 of the Act introduces a new Subsection (5) to Section 170 of the Companies Act 2006, such that the duties of directors also to shadow directors (as defined by section 90). 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 105 of the Act 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).

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.

Indeed, as a result of these changes, a non-executive or non-registered director, particularly as often occurs in small family businesses where an inactive family member is undoubtedly involved in directing the company, that such parties may be personally liable for another director’s breach of fiduciary duties, may be disqualified and may have his/her personal assets at risk should any Court subsequently determined that they were a shadow director.

Should you require further assistance or have any query in respect of these changes please do not hesitate to contact Francis Wilks & Jones and we can assist with these matters.

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.

The changes 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 & Jones we 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 ALL company 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.