UK Corporate Briefing: Issue 2 - Summer 2015

Welcome to the latest edition of Dentons' UK Corporate Briefing, a quarterly summary of the most significant recent and forthcoming developments in company law and corporate finance regulation in the UK.

In this edition, our lawyers examine:

Legislation update

The banning of bearer shares under the Small Business, Enterprise and Employment Act 2015 Changes to the UK company accounts regime to implement the EU Accounting Directive Potential increases in fines for offences under the Companies Act 2006 Case law update

The power of a company's shareholders to change drag-along rights in the company's articles of association Determining which law governs who has authority to sign an English law contract for an overseas company The importance of giving notice of a warranty claim correctly Restoring a company to the register for the purpose of appointing a liquidator to claw back assets of the company Regulatory update

Guidance issued by AIM on common free float issues and on AIM Rule 31 The latest Statement of Principles issued by the Pre-Emption Group Please contact us if you would like to discuss any subject covered in this issue.

Legislation update

Bearer shares banned

The first of the corporate transparency provisions in the Small Business, Enterprise and Employment Act 2015 came into force on 26 May 2015 with the banning of share warrants to bearer, or bearer shares as they are more commonly known. (See issue 1 for an overview of the Act.)

From 26 May it has been unlawful for a UK company to issue bearer shares. A company whose articles of association authorise the issue of bearer shares can amend its articles without having to pass a special resolution or comply with any provision for entrenchment.

On the same date a transitional nine-month period started during which existing bearer shareholders may surrender their bearer shares and convert them into registered shares. The legislation contains detailed rules about the procedures and imposes certain duties on companies with existing bearer shareholders.

If a bearer shareholder does not elect to convert his bearer shares within the surrender period, the affected company must apply to court to cancel those shares and make an associated payment of capital into court. This amounts in effect to a reduction of the company's capital. Typically it will therefore be simpler, cheaper and less disruptive for a company if any bearer shareholders exercise their surrender and conversion rights. Any funds paid into court will typically remain there for three years, after which the bearer shareholder loses any right to repayment and the funds go to the state.

Small Business, Enterprise and Employment Act 2015, sections 84-86 and Schedule 4

Company accounts: amending regulations

New regulations came into force on 6 April 2015 to implement in the UK Chapters 1 to 9 of the EU Accounting Directive. The Directive provides an updated EU-wide accounting framework for statutory accounts. The new regulations apply to accounting periods starting on or after 1 January 2016, though early adoption is possible.

A significant change is to reduce the financial reporting burden for small companies. In particular:

The regulations adopt the maximum turnover and balance sheet limits for small companies allowed by the Accounting Directive, enabling a larger number of companies to access the lighter touch small companies regime. The maximum permissible turnover limit is £10.2 million (up from £6.5 million) and the maximum permissible balance sheet total is £5.1 million (up from £3.26 million). There is no change to the maximum number of employees (50). There are equivalent increases to the limits for small groups. The regulations reduce the number of compulsory disclosures small companies must make. They also allow a small company to prepare an abridged balance sheet and profit and loss account, if approved by all the company's shareholders. Other changes include:

Allowing companies in the same group as a non-listed public company access to the small or medium-sized companies regimes. Allowing companies to use alternative layouts when preparing their profit and loss account and balance sheet, subject to certain qualifications. The Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015

Increase in fines for company law offences

Failure to comply with many of the requirements imposed by the Companies Act 2006 on a company and its officers is a summary offence...