On 26 March 2015 the Small Business, Enterprise and Employment Act 2015 (the Act) received Royal Assent. The Act covers a diverse range of topics. However, certain key sections implement a series of reforms of the UK's company law aimed at improving the transparency and accountability of UK-incorporated companies. These changes will affect all corporate groups with a UK-incorporated entity. Following the UK's leadership, the changes are expected to be replicated throughout the EU in the near future. In this note we have summarised the key changes and their likely implementation dates.

Register of Beneficial Owners

For the first time, the beneficial owners of a UK-incorporated company will be recorded in a publicly accessible register. In a change from the original proposals, this measure does not currently extend to cover limited liability partnerships. Companies will need to record the following:

(i) information on individuals who ultimately own or control more than 25 percent of a company's shares or voting rights, or who otherwise exercise control over the company or its management, called "persons with significant control" (PSCs); and

(ii) where a qualifying beneficial interest is held through a trust arrangement, information on the trustees or any other natural persons exercising control over the activities of the trust.

The rules "look through" nominee arrangements as they focus on the beneficial ownership, not the registered ownership, of the shares. Where there is a chain of UK companies in a group structure, only the top UK company is required to maintain a PSC register.

UK companies that are subject to Rule 5 of the Disclosure and Transparency Rules (e.g., companies listed on the Main Market of the London Stock Exchange or AIM) will be exempt from the requirement to keep a PSC register as they are considered to already be subject to equivalent disclosure requirements. A subsidiary of such an exempt company will be required only to identify the relevant exempt company as the subsidiary’s beneficial owner. It will not be necessary to provide details on the owners of the exempt company.

Failure to Comply

The obligation to disclose the information is placed both on the company and on the PSCs:

• A UK company is required to take reasonable steps to discover the relevant information for inclusion in a PSC register and to give notice demanding information to any person who may reasonably be a PSC. The UK company's directors may be liable to fines and imprisonment for failing to discharge this duty.
• A PSC is required to comply with any notice for information served on it by the UK company. If a PSC fails to do so, then the UK company may follow a procedure to suspend the rights attaching to the shares controlled by the suspected PSC and to prevent their transfer. While this procedure is optional, directors may feel obliged to follow this procedure or face their own sanctions as noted above.

Required Information

The information required to be made available includes the PSC's full name, date of birth, nationality, country or state of usual residence, residential address, service address, date on which it acquired the beneficial interest in the company, and details of that beneficial interest and how it is held. All of this information will be publicly available except for the PSC’s residential address. In exceptional circumstances it will be possible to make an application to the Registrar of Companies to protect certain beneficial owner information.

Implementation Dates

As from January 2016 all UK companies will be required to maintain a PSC register. The information in this register must be notified to Companies House as from April 2016. After this date it will not be possible to incorporate new UK companies without first providing the beneficial ownership information to the Registrar of Companies.

Bearer Shares

As from 26 May 2015 UK-incorporated companies will no longer be allowed to issue new "bearer shares" (i.e., shares that are owned by the holder of share certificate, but for which there is no formal register of holders). By 26 February 2016 all companies must have converted any existing bearer shares into registered shares.

Any existing bearer shares will have their associated rights automatically suspended, and will be incapable of transfer, as from 26 December 2015.

Corporate Directors

As from October 2015 the use of corporate directors (i.e., a company acting as a director of another company) by UK-incorporated companies will be prohibited. It is possible for the Secretary of State to publish exceptions to this rule, but at present no exceptions have been published and no firm date for the publication of any exceptions has been set.

Any existing corporate directors in place before October 2015 will automatically cease to be regarded as such as from 26 March 2016.

Director Disqualification

The courts now have greater flexibility when making orders to prohibit an individual from acting as a director of a UK company. A court may now take into account conduct relating to overseas companies when considering a disqualification application in relation to the conduct of a director of a UK-incorporated insolvent company.

Filing Requirements

The Act makes various changes to the filing obligations of UK-incorporated companies. The process for making an annual filing of the company's director and shareholder details is being simplified, as is the format of various Companies House forms. Directors' dates of birth will no longer appear on the Companies House public website in full (although they must still be notified in full to Companies House), and the process for striking off non-trading companies with no assets or liabilities is to be made faster. These changes are likely to take effect from April 2016.

Practical Considerations

The information being sought on PSCs is not new. All EU banks and professional firms have been required to gather similar information on their clients for some time to comply with anti-money-laundering regulations. However, the fact that this information will be publicly available is a significant change in approach. While the UK is taking the lead in implementing these changes, the rules will ultimately be implemented across the EU.

For now, all organisations having a UK company or trust within their group structure will need to prepare for details of their PSCs to be made publicly available in the UK. Ultimately, this will extend to all organisations having any EU-based company or trust within their group structure. This will require each UK company to assess and gather information on its PSCs.

Where a company engages the services of a professional company secretary, then such secretary should already be aware of the various changes being made to the required filings and Companies House forms. Through VP Secretarial Limited, which provides bespoke company secretarial and compliance services, Vedder Price can incorporate UK companies, act as registered office and company secretary, provide an address for the service of process in the UK and maintain client UK companies in good standing.

If you have questions about this update, please contact Richard L. Thomas at +44 (0)20 3667 2930, Sam Tyfield at +44 (0)20 3667 2940, Jonathan Edgelow at +44 (0)20 3667 2925, Lydia Sadler at +44 (0)20 3667 2926 or the Vedder Price attorney with whom you work.