October 7, 2016 The Small Business, Enterprise and Employment Act
In her first Conservative party conference speech as leader the Prime Minister, Theresa May, was outspoken on matters such as tax dodging and corporate governance. Highlighting the dangers of drawing those who are supposed to be holding business accountable from ‘the same narrow social and professional circles as the executive team,’ the Prime Minister said the government intends to publish plans which include having consumers and workers represented on company boards.
We will keep an eye on the progress of these plans but in the meantime there is plenty to occupy those who are tasked with governance and investor interactions, starting with the ongoing implications of the Small Business, Enterprise and Employment act. Take the register of people with significant control (PSC) for example.
With effect from 6 April 2016 companies, LLPs and SEs were required to maintain a register of those who are deemed to have a position of significant control in the organisation. This includes owning more than 25% of the company’s shares, holding more than 25% of voting rights in the company, or having the right to exercise significant control including appointing or removing directors. Individuals who hold the right to exercise or actually exercise significant control over a trust or company which itself significantly controls another entity are also captured by this legislation.
Information in respect of persons of significant control has to be registered, with Companies House indicating that this registration is likely to be at the same time as companies complete their confirmation statement. Essentially a check of information held including details of directors and shareholders, the confirmation statement replaced the annual return with effect from 30 June 2016. At the same time changes in the statement of capital came into play alongside an option for private companies to keep certain information on the public register rather than maintaining their own internal statutory documents.
These changes may seem relatively minor; but as with any alteration to ongoing practice, the first time new processes come into play can pose a challenge for company secretaries or for those who are tasked with statutory reporting. Statutory reporting is a legal requirement and whilst the idea of merely confirming details seems to be fairly straightforward, it still requires a measure of checking to ensure that records are up-to-date and accurate. For example, it can be all too easy to forget that a director moved house at the beginning of the last reporting period.
Accurately reporting shareholdings or details of directors or persons of significant control may seem like a bureaucratic burden; but these areas, along with ideals such as comply or explain, play an important part in the investor dialogue as well as signposting the strength of governance within the organisation.