In an attempt to address and simplify the problem, the Government’s department for Business, Innovation & Skills (BIS) launched the Red Tape Challenge, a consultation process focusing on lowering the amount of paperwork being undertaken and freeing up the time and finances of British businesses.
150 companies were consulted on four main areas; annual returns, communication, transparency and problem resolving. The results, published in April 2014, will form the basis of amendments to the 2006 Companies Act and secondary legislation.
The first and primary focus of the consultancy concerned the filing of annual returns. Not too surprisingly, the responses showed that these were considered laborious, time-consuming and costly, especially for SMEs.
As a result, BIS proposed allowing companies more flexibility when it comes to confirming the veracity of the information they supply. Rather than requiring them to complete an annual return at a set point in the year, companies could be allowed to confirm those details at any point.
Such a situation could arise, for example, if a company appoints a new director. Whilst updating that information, the company will be asked whether it wants to “check and confirm” other information at the same time. If it does so, no further action would be required if there are no further changes within the next twelve months.
BIS also made a firm commitment to online technology, confirming that in future it would accept correspondence and statutory notices electronically if preferred. Concurrently, it advised that there would be significant changes to the joint filing tool used to make such submissions, thus cutting down on unnecessary duplications.
The consultation then tackled transparency of company registers and statement of capital. Under current regulations a company has to submit a list of shareholders every 3 years, whether there have been any changes or not. BIS again proposed to simplify this procedure by allowing companies to ‘opt out’ of keeping any or all such registers, namely:
• Register of directors;
• Register of directors’ residential addresses;
• Register of members;
• Register of secretaries;
• The proposed new requirement to hold a register of company beneficial owners
It noted however, that should this approach be adopted, it would be the company’s responsibility to ensure the public register is kept up to date, including member’s addresses and the full dates of birth of directors, which will be available to the public. If the company keeps the registers, only the month and year of a director’s date of birth will appear on the public register.
The consultation then considered whether Statement of Capital requirements – i.e. the stated value of the company’s shares – should be amended.
It was felt, following the introduction of the new statement of capital as part of the 2006 Companies Act, that there had been some confusion surrounding the issue of companies disclosing paid and unpaid amounts per share, especially if those shares had been issued at different times.
BIS recommended that the information required in this respect should also be simplified and proposed that companies should only have to confirm the total amount unpaid on the statement of capital, not the paid and unpaid amounts per share, unless and until a private company registers as a public company. At that point, full disclosure of the aggregate amount paid on its share is required.
The final part of the consultation concerned the procedure for appointing a director and queried whether the current system of filing of a “consent to act” should also be simplified. The responses received suggested that the system was outdated and cumbersome.
Consequently BIS proposed a “statement of truth” to be submitted to Companies House, confirming that the director or company secretary has consented to their appointment. Companies House would then write to confirm the appointment’s inclusion on the public register.
There is no specific timeline for these recommendations to become law; they will be introduced when parliamentary time permits and form amendments to the Companies Act 2006 however company directors and financial officers would do well to consider the impact the changes will have on their business. There’s no time like the present to plan for the necessary adjustments.
David Parkinson of HW Fisher
Image: red tape via Shutterstock
