Policy update

Peter Swabey, FCIS, Policy & Research Director, ICSA

Essex Branch - 22nd March 2016

Policy updateAgenda

Small Business, Enterprise and Employment Act 2015

PSC Register

Consultations

•FRC Succession Planning

•FCA Market Abuse Regulation and Directive

•EU non-binding guidelines for reporting non-financial information

www.slideshare.net/icsaevents

Policy Update

The Small Business, Enterprise and Employment Act 2015

‘SBEE Act’

A product of the Red Tape Challenge ………

The Small Business, Enterprise and Employment Act 2015A revised timetable ………….. AGAIN (15)

Full details of the latest timetable can be found on the Companies House website at :

https://www.gov.uk/government/news/the-small-business-enterprise-and-employment-bill-is-coming

The Small Business, Enterprise and Employment Act 201526 May 2015

Bearer shares were abolished. There is now a legislative timetable in place and any existing bearer shares must be surrendered by 26 February 2016.

If your company has bearer shares in issue there is a statutory process on which you should already have embarked – notices to holders were due to go out by 26 June 2015. If you do not have this in hand, you need immediate legal advice.

The Small Business, Enterprise and Employment Act 201510 October 2015

The day element of the date of birth of directors was hidden from the public register

The accelerated strike-off process was introduced – down to two months from three – same with objections. Companies House no longer re-advertises a Gazette notice once a valid objection has expired

The requirement to give consent to act as a director or secretary has changed. The company confirms that consent has been given and Companies House will write to all newly appointed directors.

The Small Business, Enterprise and Employment Act 2015April 2016 (was December 2015)

The process to rectify the register in the event of director disputes or registered office disputes will be simplified.

If the director disputes the fact, the company must provide evidence of consent.

If a registered office address is disputed, Companies House will investigate and will have power to change the ROA to a default address

The Small Business, Enterprise and Employment Act 20156 April 2016

Companies will be required to keep a register of people with significant control (a PSC Register)

Implementing regulations for companies and LLPs were laid before Parliament on 25 January, and that these can now be found:

Companies - http://www.legislation.gov.uk/ukdsi/2016/9780111143018

LLPs - http://www.legislation.gov.uk/ukdsi/2016/9780111143025

 

 

PSC Register: policyThere are five core elements to new Part 21A of the Companies Act 2006 (CA06):

1.The definition of a ‘person with significant control’

2.The legal entities in scope of requirements

3.Obtaining the information

4.The register

5.Disclosure of and access to the information

BIS have replicated or extended existing company law criminal offences to deal with those who fail to provide information or provide false information.

PSC Register: definitionBIS have used the existing definition of ‘beneficial owner’ in the EU anti-money laundering context as the basis.

New Schedule 1A to the CA06 sets out five ‘specified conditions’. An individual meeting one or more of these conditions is a Person with Significant Control (‘PSC’):

1. Ownership of more than 25% shares2. Ownership of more than 25% voting rights3. Ownership of right to appoint or remove a majority of the board of directors4. Right to exercise significant influence or control5. Right to exercise significant influence or control over a trust or firm which trust or firm would be a PSC, were it an individual)

In certain circumstances a legal entity must be noted in the register (‘relevant legal entities’ or ‘RLEs’).

PSC Register: scopeAll UK companies, except companies listed on UK regulated or prescribed markets, and Limited Liability Partnerships will have to keep a PSC register.

PSC Register: obtaining informationCompanies must take reasonable steps to find out if they have any PSCs or RLEs and identify them.

In some cases the company will already have this information.

In others the company will need to serve notice on individuals and others. A person in receipt of such a notice is required to reply. Failure to do so is a criminal offence. Shares may also be subject to restrictions by the company.

PSCs and RLEs are also required to disclose their interest in the company to the company in certain circumstances.

PSC Register: the company’s registerCompanies must hold and keep available for public inspection a PSC register. This will contain information on the PSCs’:

•Full name•Service address•Country or state of usual residence•Nationality •Full date of birth•Usual residential address (not publicly available)•Date on which PSC obtained control•The nature of his or her control over the company

Register must be kept up to date as information changesPeople may access the register on request.

PSC Register: the central registerCompanies must provide all the information in their PSC register to Companies House on incorporation and then at least once every 12 months as part of the new confirmation statement.

All information will be made available on the public register except:

• The full date of birth (only the month and year will be shown on the public register, except where the company elects to keep its PSC information solely on the register at Companies House)

• The usual residential address

PSC Register: the protection regimeIndividuals at serious risk of harm will be able to apply to the registrar of companies to prevent their information being publicly disclosed on the company’s register and the central register.

Specified public authorities will have access to protected data on request.

BIS have recently consulted on this regime - https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/437974/bis-15-315-register-of-people-with-significant-control-consultation.pdf

Covers the scope, nature and extent of control, fees, the protection regime and warning and restrictions notices

PSC Register: guidance

Two types of guidance:

•Statutory

•Non-statutory

The legislation requires the Secretary of State to publish statutory guidance, which means that it has legal effect, on the meaning of ‘significance influence or control’ in the context of the PSC register.

PSC Register: guidance

Non-statutory guidance has been produced by a working group on behalf of BIS. This addresses such issues as:

•What is a PSC or an RLE and what do they need to do

•What information is being collected and why

•Who can access it and how

•Which companies are affected and what they need to do

•What ‘reasonable steps’ means

•What to do if you don’t receive the required information

•How to manage your PSC Register

 

PSC Register: guidance

Both sets of guidance can be found :

https://www.gov.uk/government/publications/guidance-to-the-people-with-significant-control-requirements-for-companies-and-limited-liability-partnerships

- and on the ICSA website

BIS have indicated that further guidance for PSCs will be published next week.

 

PSC Register: ACTION

Companies should start considering whether they have one or more PSC’s. If they do, ensure that these people can be identified and data collected. Although DTR5 companies (which have to comply with the Listing Rules) and some others are exempt, the new requirements do apply to the subsidiaries of such companies.

 

The Small Business, Enterprise and Employment Act 201530 June 2016

The new ‘check and confirm’ annual confirmation statement will replace the annual return. Companies will be required to begin filing their PSC Register information at Companies House. Private companies will also be able to choose to keep some of their registers at Companies House on their check and confirm date. The process for disqualifying directors will be ‘updated and strengthened’ and the statement of capital will be simplified.

The Small Business, Enterprise and Employment Act 20151 October 2016

With specified exceptions, companies will no longer be able to appoint corporate directors; they will have 12 months to remove any existing corporate directors that are no longer allowed under the exceptions.

BIS have been consulting on the exceptions to the prohibition of corporate directors. The implication is that companies will still be able to use corporate directors for administrative purposes, provided that all the directors of the corporate director are real people. It would be prudent to identify situations where your company use corporate directors and consider how you will comply with the new rules.

The Small Business, Enterprise and Employment Act 2015Late 2016 / early 2017

Some additional information will be able to be filed at Companies House – no doubt we will hear more closer to the time.

The UK implementation of the EU’s 4th Money Laundering Directive, expected in 2017, will have an impact on the filing of PSC Register information – we await information about the impact of this change.

 

Policy Update

Recent Consultations

Policy UpdateConsultations

12th October – FRC Roundtable on Proxy advisers 22nd October – BIS Roundtable re PSC Guidance5th November – FCA Amendments to Listing Rules9th November - 2016 ISS Benchmark Policy 11th Dec – FRC Enhancing Confidence in Audit24th Dec – ESMA European single electronic format29th January – FRC Succession Planning4th February – FCA re MAR implementation

Policy Update

Succession planning: discussion paper but FRC doesn’t intend Code changes

Market Abuse Regulation: Updating processes and informing/training directors (have to be in place for April 2016)

Potentially a lot of work for some companies

Policy Update

Policy Roundup

Policy Roundup

Shareholder Rights Directive – currently stuck because there’s no agreement on country by country reporting but otherwise agreed.

EU non-binding guidelines for reporting non-financial information: Consultation is out but most of what they are suggesting companies do, we do already (and it’s non-binding guidelines anyway). It’s implementation of the 2014 Directive

 

 

Policy Roundup

Government

Very keen on deregulation

New incarnation of the red tape challenge

Continue to emphasise the need for a company secretary in all companies

Policy RoundupStewardship

ICSA is working with a number of partners to help the FRC review the extent to which the Stewardship Code has begun to have an impact on company and investor engagement

Working with the Investment Association and the NAPF

Guidance on more effective stewardship

NB the Red Lines Voting initiative

Policy Roundup

Ethics and Culture

Working with FRC as part of the #culturecoalition to look at issues around corporate culture.

Guidance on Board Effectiveness likely to be revised when this reports in the Summer

Working with the IBE and Mazars on a piece of research looking at business culture to be launched at the ICSA Conference on 8th / 9th March

Policy RoundupThe role of the Nomination Committee

Working with EY on a piece of research to be launched in May

Policy RoundupMinute Taking

Working on a review of minute taking practice following the Treasury Select Committee criticism of HBOS record keeping

Thought leadership from ICSA