Proposed Changes To Company Law

A number of changes to company law are proposed in the Small Business, Enterprise and Employment Bill which is currently making its way through Parliament. Some are intended to increase transparency and trust in the UK business environment as part of the global agenda to tackle issues such as tax evasion, money laundering and terrorist financing. Others are measures to simplify company filing requirements in response to the Government's Red Tape Challenge.

The changes range from minor administrative matters to some that will have significant implications for many companies. The Bill is expected to pass into law in spring 2015, but it will be brought into force in stages. The anticipated implementation dates for company law changes are as follows.

Around May 2015 (two months after the Bill is passed)

Abolition of bearer shares

At present, it is possible for a company to issue bearer shares. Details of the holders of bearer shares are not entered in the company's register of members, and the shares are transferred by delivery of a warrant representing the shares. Around 1,220 UK companies currently have bearer shares in issue.

The issue of new bearer shares will be prohibited, and holders of existing bearer shares will have nine months in which to surrender them to the company for conversion into registered shares. Within one month of these provisions entering into force, and again before the final month of the nine month surrender window, the company will have to give notice to holders of bearer shares of their conversion rights. The notice must be made available on the company's website (if they have one) and published in the Gazette. If any bearer shares are not surrendered for conversion, the company will be required to apply to court to cancel them.

Companies which make provision for bearer shares in their articles will be able to remove these provisions without the shareholders passing a special resolution. A copy of the amended articles would have to be filed at Companies House.

October 2015

Restrictions on having corporate directors

Companies are currently permitted to appoint another company to be a director, provided that they have at least one director who is an individual.

Unless an exemption applies, companies will no longer be permitted to appoint corporate directors and any corporate director still in office one year later will automatically cease to be a director.

Proposed exemptions (which have been subject to a recent...