Introduction
The Small Business, Enterprise and Employment Act 2015 (the “Act“) received Royal Assent on March 26, 2015 and marks the single biggest change to company law since the Companies Act 2006 (“CA”). It will be phased in over the course of the next 12 months. Although the Act’s title implies that it will only have an impact upon small businesses, it actually introduces significant changes which will affect all companies.
This article focuses on two key changes which took effect from May 2015 – the abolition of bearer shares and the application of the general duties of directors under the CA to shadow directors. We will provide further updates as additional parts of the Act come into force.
Abolition of bearer shares
Bearer shares are unregistered shares that are owned by whoever physically holds the share warrant. As no one is entered in the company’s register of members as the owner of such shares, they are easily transferable and held anonymously.
Holders of existing bearer shares have until 26 February 2016 to surrender them to the company in exchange for registered shares. If the bearer shares have not been surrendered or exchanged within this timeframe, they will be cancelled and the relevant monies paid into court by the company.
If a company’s articles of association contain provisions permitting the issuance of bearer shares, no amendment is required to remove such a provision but, if a company does intend to remove them to ensure consistency with the Act, they will be able to do so by passing an ordinary resolution rather than a special resolution (which would usually be required to amend articles).
Shadow directors
The second change is to widen the application of directors’ duties to shadow directors. Previously, the general statutory duties that apply to directors under the CA only had limited application to shadow directors. Shadow directors are defined in the CA as persons “in accordance with whose directions or instructions the directors of the company are accustomed to act”.
Section 170(5) of the CA has been amended to provide that the general duties of directors apply to shadow directors where and to the extent they are capable of applying and the Secretary of State has been given power to make regulations concerning the application of general duties to shadow directors.