Company Secretarial Update

Posted by Sarah Carter on
With most of The Small Business Enterprise and Employment Act 2015 now implemented, Sarah Carter looks back at what has been introduced and what more may be to come.

The last eighteen months have been a time of considerable upheaval in the corporate governance world but much of the recent legislation has now been implemented and is bedding down.  Whilst some companies have still to file their first confirmation statements, most companies will already have done so and should also now have their PSC Register in place. So the question is: What next?

Transparency: an end to corporate directorships?

The last of the big implementations under The Small Business Enterprise and Employment Act 2015 (SBEEA) surrounds the introduction of a prohibition on corporate directors.  A corporate director is a company, rather than an individual, which acts as a director of another company.  The legislation surrounding corporate directors has already been amended relatively recently by the Companies Act 2006, which required every company to have at least one human director, but SBEEA aims to go further.  The rationale behind this change is the latest corporate buzzword - transparency - with the aim being to have identifiable individuals at the helm of every company. 

However, it appears that implementation of this particular change is not proving simple.  There have been several delays to planned implementation dates and currently a further date has yet to be confirmed.  In addition, the exceptions which are expected to apply to this prohibition have also yet to be determined.  Watch this space for further announcements over the coming months.

The Fourth European Anti-Money Laundering Directive

Despite the Brexit vote in 2016 and the triggering of Article 50 at the end of March 2017, UK companies can still expect to have to comply with this piece of European legislation when it comes into force in June 2017.  The good news is that SBEEA has given the UK a good head start in this regard, since much of The Fourth European Anti-Money Laundering Directive (the Directive) will surround the subject of beneficial ownership of companies and the availability of related information. Essentially this equates to the information contained in the PSC Register, which became a legal requirement for UK companies last year.

However, that is not to say that the Directive will have no impact in the UK: it is anticipated that the requirements for notifying Companies House of changes to PSC information will alter under the Directive. Currently a company is under no obligation to tell Companies House of a change in its PSC information except when its next Confirmation Statement is due, although the company's registers must be immediately updated.  The new requirements under the Directive are likely to be similar to those which currently apply to a change of director, with appropriate forms being required to be filed with Companies House stating what the changes are and when they happened.  It is expected that in future the new rules will require changes to PSC details to be notified to Companies House within six months of any change occurring.

Troubleshooting: common problems with compliance

Since its inception in April 2016 we have repeatedly seen two particular problems cropping up in relation to the PSC information requirements:   

Understanding the PSC Conditions

You are probably aware that Schedule 1A, Part 1 of the Companies Act 2006 specifies five conditions, at least one of which must be met, for an individual to be a person with 'significant control'.  In relation to a company, these five conditions are:

  • direct or indirect ownership of more than 25% of the shares in the company (for a company limited by guarantee this would mean an individual holding a right to a share in more than 25% of the company's capital or profits);
  • direct or indirect control of more than 25% of the voting rights in the company;
  • a direct or indirect right to appoint or remove a majority of the Board of Directors of the company;
  • the actual exercise of, or the right to exercise, significant influence or control over the company. 
  • the actual exercise of, or the right to exercise, significant influence or control over the activities of a trust or firm which itself satisfies any of the first four conditions.

What wasn't immediately clear when the SBEEA first came into force was that if you satisfy one of the first three conditions (relating to shares, voting rights and the board) then it is not necessary to also indicate satisfaction of criteria 4 or 5 for the same PSC.  This has now been clarified by the Statutory Guidance issued by BEIS (Guidance) and should be followed by companies in conjunction with the relevant legislation in future. 

Directors are not necessarily PSCs

A common misconception regarding the PSC Register is the status of directors with some companies assuming that their directors are PSCs.  Companies House set out in their Guidance a non-exhaustive list of 'excepted roles' which do not of themselves result in the relevant person having 'significant influence or control''.  The Guidance includes directors among these 'excepted roles'.  However, it is important to note that where a person is both a director and shareholder of a company, they may still be a PSC in relation to that company, but this would usually be by virtue of their shareholding rather than their directorship. 

Whilst the second condition deals with voting rights, it should be noted that these are voting rights at shareholder level, not at Board level.  Whilst the Board of a company may recommend decisions to its shareholders, the shareholders are at liberty to vote against any such recommendations and so because the Board is not controlling the shareholders in this way it will not fulfil this PSC condition.

For a director to be considered a PSC in relation to his directorship would be unusual and would be most likely to arise in relation to the fourth criterion.  If a director's role or relationship is materially different from how that role or relationship is generally understood then there may be grounds for considering him to be a PSC.

Looking ahead

The Directive aside, what are the key obligations on companies, now that most of the changes implemented by SBEEA are in place? 

Keeping its PSC information correct and update to date is the most important corporate governance obligation for most companies.  Whilst  information, such as changes to directors and registered office, are required to be filed within a couple of weeks of occurring, changes in shareholders or shareholdings as well as a company's PSC information are only currently required to be notified in its Confirmation Statement.  Much as the Annual Return had to be filed once in every calendar year, so the Confirmation Statement needs to be filed once in every 12 month period, although it can be filed earlier, at any time during that period, if desired. 

When its Confirmation Statement becomes due, a company will be asked to state that the information held at Companies House is correct and to file any changes to its PSCs, shareholders or shareholdings that have occurred in the period since its last Confirmation Statement.  It is important that all relevant information is correctly held at Companies House and also reflected in a company's statutory registers – companies should take their PSC obligations seriously to ensure compliance with these obligations.

Ongoing compliance

If you file your own Confirmation Statement be aware of what has happened during the period since your last Statement -  check the pages of the Companies House web-filing system for the information that they hold and confirm that it matches your records (which you should keep up to date as changes happen).  If the two do not match, you will need to ensure that this is rectified before completing the filing of your Confirmation Statement. 

It is important that you do not confirm information which you know to be incorrect. Ensure your records are kept up to date and accurate. 

The Good News!

For the majority of companies, the worst is over: you will by now have put your PSC Register together and, in most cases, filed your first Confirmation Statement.  As companies become used to the new regulations the Confirmation Statement should feel easier and for those companies who rarely make changes to their shareholders or PSCs, completing their Confirmation Statement should simply be a case of confirming the information held by Companies House.  Companies will need to remain aware that changes to directors, secretaries, shareholders, shareholdings, PSCs and registered offices always need to be confirmed in their Confirmation Statement and will need to keep abreast of any further notification requirements which may apply under the Fourth European Anti-Money Laundering Directive. 

How we can help

If we provide your company with company secretarial services, please let us know as soon as possible when changes occur to the structure of your company, its directors, secretaries, PSCs or shareholders.  We can assist with the production of the relevant Companies House forms and will also keep the statutory registers up to date on our industry standard software.  Approximately four weeks prior to the date for filing of your company's Confirmation Statement we will forward a draft Confirmation Statement to you for review, together with a Company Profile setting out the information we hold on our system which will have been cross checked against that held at Companies House.

If you have any queries in relation to any of the matters discussed above, or are interested in finding out more about our company secretarial services, please contact Sarah, Leanne or Wendy at and we will be happy to discuss your requirements. 

For more information on the PSC Register and changes introduced under SBEEA, please see the Companies House website

About the Author

Sarah manages the work of the Company Secretarial team. With over 13 years’ with the team she is experienced in company secretarial and corporate governance matters.

Sarah Carter
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023 8085 7333

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