The death of Corporate Directors

Posted by Sarah Carter on
The Small Business Enterprise and Employment Act 2015 aims to change many aspects of Company Law and in particular will end the use of Corporate Directors.

The requirement for each company incorporated in England and Wales to have at least one "human" director was introduced by the Companies Act 2006, but the Small Business Enterprise and Employment Act 2015 (SBEEA) goes much further in its quest for transparency in business activities. SBEEA will prohibit the use of corporate directors in all but exceptional circumstances. Any appointment made in contravention of this new legislation will be void and it will be an offence to breach these provisions.

This change will affect the many companies who currently have corporate directors. They will need to decide whether to take the necessary steps to remove any existing corporate directors from the board or if any of the limited exceptions apply.

SBEEA does not include any exceptions to the general prohibition against corporate directors, instead giving the Secretary of State power to issue regulations dealing with this together with the necessary compliance process. It is expected that a company will only be able to appoint a corporate director when all of its directors are natural persons and more information may also be required of a corporate director than is currently required. Whilst the exact nature of these exceptions is yet to be finalised, further detail is expected later in the year. We will publish an update as more information becomes available.

SBEEA introduces a transitional period for companies with corporate directors which provides that one year after the relevant provisions come into force, any residual corporate directors will cease to be directors (subject to any exceptions).

This legislation is wide reaching, affecting both smaller charitable companies and larger organisations alike. So why has this step been introduced? The objective behind SBEEA is to make UK businesses more transparent and accountable. In the future, a quick search of the Companies House registry will easily identify the individuals running that business, rather than having to unravel numerous corporate entities.

Although implementation was expected in autumn 2015, this has now been delayed and the provisions are not expected to come into force until the autumn of 2016.

Information is also accessible via the Companies House and BIS 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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