Upcoming ban on Corporate Directors

As part of the Government’s drive to encourage transparency, a ban on the use of corporate directors will come into force as part of The Small Business, Enterprise and Employment Act 2015 (the “Act”), which applies to all parts of the UK. Under the terms of the Act, all company directors will have to be natural (i.e. individual) persons however it is expected that a number of exemptions will be introduced. It was previously announced that this change would come into force from October 2015 however further to a recent consultation paper on the matter; the implementation date has been delayed until October 2016.

In addition to this, the Act offers a transition period for companies with existing corporate directors in that after one year of the new rules coming into force, therefore by October 2017, any remaining corporate directors will cease to be directors.



Details of the circumstances in which corporate directors are to be permitted have not yet been published; however a recent report suggests that any exemptions would apply only to public companies, ‘large’ private companies with complex group structures, charities; and corporate trustees.  Further, it is likely that such exemptions will only be allowed in the cases of wholly owned subsidiaries or dormant holding companies and even then, the directors of the company acting as a corporate director will itself have to be made up of only natural persons and their details available on a public register.  For most private companies (i.e. most SME’s), the ban on corporate directors is likely to apply without exemption.


Considerations for your company going forward

It should be borne in mind that an appointment made in contravention of this prohibition will be of no effect and it will be a criminal offence to make such an appointment.   We would advise all of our corporate clients to review the composition of their boards of directors in preparation for these rules coming into force, and consider taking steps to replace any corporate directors with natural persons by the dates outlined above.


Other important changes introduced by the Act

In addition to the abolition of corporate directors, the Act has introduced other important changes, some of which will impact all UK based companies.  An overview of some of the key changes to be aware of and the scheduled dates for implementation is as follows:


Abolition of bearer shares – in force

No new bearer shares can be issued and companies with existing bearer shares are now required either to convert those shares into non-bearer shares or cancel them.  Any bearer share remaining by 26 December 2015 can no longer be transferred and has no rights attaching to it.


Duty to keep a register of people with significant control (a “PSC”) – April 2016

Companies will need to keep a register of people with significant control (‘PSC register’) from April 2016, in preparation for the need to file this information at Companies House from 30 June 2016.


A PSC is anyone in the company who meets one or more of the conditions listed in the legislation. This is a person who:

  • owns more than 25% of the company’s shares
  • owns more than 25% of the company’s voting rights
  • has the right to appoint or remove a majority of the board of directors
  • has significant influence or control over the company
  • has significant influence or control over a trust or firm


Abolition of annual returns – June 2016

Companies will be freed from the requirement to submit an annual return.  Instead companies will be required to check and confirm the company information by filing a ‘confirmation statement’, and notify changes if necessary at least once every 12 months.

While great care has been taken in the preparation of the content of this article, it does not purport to be a comprehensive statement of the relevant law and full professional advice should be taken before any action is taken in reliance on any item covered.