Enhancing corporate transparencyPrint publication
We have reported previously on the Government’s proposals to enhance corporate transparency by the creation of a central registry of beneficial share ownership; tackling the use of “nominee directors” and prohibiting the use of “bearer shares”.
The Government has now published its response to its consultation paper and indicated that it intends to continue with the bulk of its proposals. These include:
- the creation of a central registry of company beneficial ownership information. The definition of a beneficial owner for these purposes is a person who ultimately holds 25 per cent. of the company’s shares or voting rights or who otherwise exercises control over the management of the company, although the Government is seeking further feedback on this. The new regime will also apply to limited liability partnerships
- companies will be obliged to obtain and maintain details of their beneficial owners and to provide that information to Companies House
- a prohibition on new bearer shares and the compulsory cancellation of existing bearer shares. The Government intends to specify a period (nine months is proposed) during which existing holders of bearer shares must surrender their bearer share warrants for conversion to the relevant registered shares.
- a prohibition on corporate directors. There will be exceptions to this where corporate directors may be of value and represent a low risk, such as where they are used in the group context. The Government is proposing a one-year transitional period
- amendments to the disqualification regime, including allowing a director’s overseas misconduct to be taken into account in disqualification proceedings and to provide for directors to compensate those suffering identifiable loss as a result of their misconduct. The Government also intends to allow insolvency office holders to assign insolvency actions, such as for fraudulent or wrongful trading, and to extend the period within which disqualification proceedings may be commenced after an insolvency from two to three years.
The Government has decided not to proceed with its proposal for a register of nominee directors. Instead, it proposes further measures to enhance directors’ awareness of their duties and potential liabilities.
The legislation will be implemented as soon as Parliamentary time allows. The Government will have to spend some of that Parliamentary team fine-tuning transitional arrangements.
The Government anticipates that a more transparent regime will attract greater inward investment. Conversely, wealthy individuals who have established corporate structures to protect family confidentiality may find, once the draft legislation is published, that they need to revisit those structures.