The Small Business, Enterprise and Employment Act 2015 – Key developments in UK corporate and company law

Peter Collins, Sharpe Pritchard

Peter Collins, senior associate in the projects team, and Febechi Chukwu, assistant solicitor in the projects team, discuss the impact of the Small Business, Enterprise and Employment Act 2015 on UK corporate and company law.

Earlier this year, on 26 March 2015, the Small Business, Enterprise and Employment Act 2015 received royal assent. The act is quite broad in its scope and the purpose of this note is to provide a summary of some of the core aspects of the act that impact on UK corporate and company law. The general purpose of this legislation is to increase trust in UK businesses and to ensure that there is greater transparency of ownership and control in UK corporations. As a consequence of these developments, the government hopes to make the UK a more attractive proposition for foreign investors, which they hope will promote economic growth. In addition, the government also seeks to limit the possible use of UK companies further for tax avoidance or other criminal activities, such as money laundering.

The Small Business, Enterprise and Employment Act is reflected in the impact it will have on other areas too. Measures are introduced to increase access to the finance that small and medium-sized enterprises (SMEs) have been finding more difficult to obtain since the financial crisis.

In addition, the act also has some impact on procurement law, by enhancing compliance and transparency in the bid process and the execution of public contracts.

Provisions already in force

Certain parts of the act have already been implemented:

  • companies are now prohibited from issuing bearer shares, and this applies regardless of the content of the company’s articles on the issue of these types of shares. A bearer share is an unregistered share that is owned by whoever physically holds the share warrant. There is no entry into the register of members and therefore these shares can be held anonymously. Those companies that have existing bearer shares are subject to a nine-month surrender process, during which existing bearer shares must be cancelled and converted into registered shares. It is proposed that the surrender process should have already started by 26 June 2015; and
  • general duties of directors have been extended to apply to shadow directors, to the extent that they are capable of applying. In addition, the Secretary of State is empowered to introduce regulations to clarify the application of directors’ general duties on shadow directors.

Forthcoming developments in company law – 2016

Perhaps the most significant aspect of the act is the introduction of the requirement for companies to keep a register of people with ‘significant control’ (PSC) over the company, which is referred to as a PSC register. This should be available at the registered office of the company. However, private companies will also be able to keep such information on the public register at Companies House and this will need to be confirmed to Companies House at least every twelve months.

Companies will no longer be required to file an annual return. They will now be required only to submit to Companies House a confirmation statement, which will state that the company has delivered all the information required from it to Companies House for the twelve-month period immediately prior.

Private companies will have the option of keeping information that is currently maintained in statutory registers, on a public register at Companies House. This includes the register of members, directors and secretaries.

Companies will be able to request that the Registrar of Companies omit the day, but not the month or year, of birth for company directors from the register that is available for public inspection. However, companies will still be required to submit the full birth details of directors to the Registrar.

Under previous legislation, when companies appointed a new director or company secretary, they had 14 days to notify Companies House of this appointment and this had to be accompanied by a formal ‘consent to act’ from the appointee. The act removes this requirement and instead requires the company to make a statement that an appointee has consented to act. In addition, the Registrar will be required to send a notice to newly appointed directors as soon as possible after their appointment, including information on the role and duties of a director.

The Secretary of State is empowered to apply to the court for a disqualification order where a director has been convicted of certain offences overseas.

There will be a reduction in the period of time it takes to strike off a company. This will be mainly due to the following:

  • the Registrar will now have to wait 14 days and not one month before sending additional communications to the company after an application for striking off; and
  • the Registrar will be able to strike off a company two months after publication of a notice in the Gazette, reduced from three months.

The act introduces statutory definitions of ‘small business’, which are businesses with fewer than 50 members of staff, and ‘micro businesses’, which have fewer than 10 members of staff, and these definitions can now be relied on in subordinate legislation.

The Secretary of State is required to introduce further regulations necessitating companies with 250 or more employees to publish information about gender pay gaps.

A final key company law development under the act is the introduction of the general requirement that all directors must be natural persons, as well as the prohibition of the appointment of corporate directors. In addition, it is envisaged that from some point late next year, there will be a twelve-month grace period, after which all existing corporate directorships will be formally brought to an end. This area is not, however, completely determined and it is likely that there will be further legislation to set out the exceptions to this new general requirement.

SMEs and their increased access to finance

An important part of the act is the introduction of measures designed to increase the access that SMEs have to be able to finance, by encouraging traditional lenders to be more receptive to SMEs and also by providing SMEs with access to the alternative finance industry.

Some of the core developments include the following:

  • certain types of banks are now required to share data on their SME customers with other lenders through Credit Reference Agencies. These are required to ensure that all lenders have equal access to that data;
  • increasing the number of small and medium-sized businesses that have access to the Financial Ombudsmen Service; and
  • requiring selected banks to share information with online finance platforms on SMEs that have been rejected for finance in order to provide these SMEs with access to alternative financing arrangements.

Public procurement law aspects

The act will also have some impact on the law of public procurement:

  • the Secretary of State is empowered by the act to introduce regulations that will impose duties on a contracting authority in respect of exercising their procurement function. These duties include: exercising procurement functions in an efficient and timely manner; publishing reports on compliance with the regulations; making information and documents necessary to bid for a contract available without charge; ensuring reasonable timescales and manners of engagement with parties to contracts; and accepting invoices by electronic means without charge, as well as publishing reports on the number of such invoices received; and
  • in addition, the Secretary of State is empowered under the act to investigate the exercise by a contracting authority of what are deemed to be relevant functions relating to procurement.

The impact of the act will be quite broad. However, the exact requirements and dates of implementation are not finalised for many of the proposed new reforms. It is envisaged that there will be secondary legislation and guidance notes to follow that will supplement what has or is soon to be introduced.

Our company and commercial team sits within the multidisciplinary projects group and we are able to call upon the assistance of various lawyers at all levels of qualification as necessary. By adopting this approach, we are able to ensure that our clients always have suitably qualified lawyers dealing with their requirements in a pragmatic and cost-effective way.

This article is for general awareness only and does not constitute legal or professional advice.

For further information, contact Peter Collins on 020 7405 4600 or email, or Febechi Chukwu on 020 7405 4600 or email