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.
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