Key changes to the Companies Act 2006 - are you ready?
During the recent weeks in which the so-called “Panama Papers” were released, a new law was implemented in the UK which will have a significant impact on all companies, Limited Liability Partnerships (“LLPs”) and Societates Europaeae (“SEs”). The changes to the Companies Act 2006, brought about by the Small Business, Enterprise and Employment Act 2015 (the “Act”), which is being implemented in phases, are aimed at increasing transparency regarding the ownership and control of companies. References to companies throughout this article should generally be read as applying to LLPs and SEs, although certain modifications apply to LLPs which are outside the scope of this article.
One of the key changes brought about by the Act sees the introduction of the requirement for all companies (subject to limited exceptions) to keep a new statutory register, the Register of People with Significant Control (“PSC Register”). The PSC Register is to sit alongside a company’s existing statutory books and is in addition to the register of members (shareholders) of a company. Additional provisions due to come into force on 30 June 2016 will also require companies to file their PSC Register with Companies House at least annually, along with a Confirmation Statement (which will be replacing the current Annual Return).
Click here for a link to our client briefing summarising the steps that each company must take to satisfy the requirements to keep and maintain its PSC Register.
In addition to the introduction of the PSC Register, the Act has also introduced changes to provisions affecting the appointment and removal of directors and company filing requirements which all directors and company secretaries need to comply with in the future.
Changes affecting the appointment and removal of directors
The Act has introduced a replacement of the consent to act procedures for directors and secretaries. Upon appointment of a director or company secretary, a company is now required to provide a statement to the Registrar of Companies that the director’s or company secretary’s consent to act has been obtained. Companies House will then notify such director or company secretary of their appointment. It is therefore important that a company retains evidence of each director’s or company secretary’s consent to act, such as a letter of appointment or notice of willingness to act countersigned by the individual being appointed. This is particularly important because the Act has also introduced a process by which a director can apply to have their name removed if they did not consent to act. Where such an application is made and the company fails to provide evidence of such consent, the Registrar will make the requested removal.
From October 2016, the Companies Act 2006 will also be amended to include a requirement that all directors must be natural persons thereby prohibiting corporate directors from holding office (subject to the limited exceptions to be prescribed by the Department for Business, Innovation & Skills). Where one or more directors of a company are corporate directors, such director(s) will cease to be a director on the date that is 12 months from the date on which the prohibition comes into force. Companies who have appointed a corporate entity as a director of a company, or who have been appointed as a director of a company, will therefore need to take steps over the next few months to change their appointed director(s).
The general duties of directors set out in the Companies Act 2006 also now apply to a shadow director of a company where, and to the extent that, they are capable of applying. In addition, the Act has also introduced amendments to the Company Directors Disqualification Act 1986 allowing the Secretary of State to apply to the court for a disqualification order where a director has been convicted of certain offences overseas. This includes an offence (corresponding to a similar offence in the UK) committed in respect of the promotion, formation, management, liquidation or striking off of a company (or any similar procedure) or the receivership of a company’s property. The Act also expands the matters which a court may have regard to when considering whether a person should be disqualified as a director. These include enabling the court to consider conduct in relation to overseas companies.
Changes to company filing requirements
From June 2016, the submission of a company’s Annual Return is being replaced with a “Confirmation Statement” where the company will be required to confirm that all information required to be delivered by the company to Companies House either has been delivered or is being delivered at the same time as the Confirmation Statement. Such information required to be delivered includes:
- any change of address;
- any change of director or secretary or particulars of director or secretary;
- any change of the company’s principal business activities (a related change is that all companies must now specify a type and intended principal business activities upon incorporation).
In order to do this, a company will need to “check and confirm” that information held by Companies House is accurate. Companies will still be required to deliver a statement of capital to the Registrar (although this does not apply when there has been no change since the previous Confirmation Statement) and will still need to pay a fee to Companies House when the Confirmation Statement is delivered.
The Act will also introduce a process by which private companies will have the option of having their statutory registers held at Companies House dispensing of the requirement to maintain its statutory registers separately. This would require the unanimous agreement of the shareholders of the company.
The above is a summary only of the key changes brought about by the Act - these are extensive and it is expected that many companies will need advice and guidance as to how to comply with the provisions.
Remarkable altruism from the world of big business
A couple of years ago, Tesla Motors created ripples on the patent landscape when its CEO, Elon Musk, announced on his blog that he was making its patent portfolio available for use free of charge. In what was certainly a dramatic move from a company that is no stranger to patent litigation, he stated that the car company would not enforce its patents relating to electric vehicle technology against anyone who wanted to use it. Toyota followed suit, announcing that it would be making its impressive portfolio of 5,650 patents relating to hydrogen fuelcell cars royalty-free until 2020.
Patents are rights in technological inventions. A patent enables its owner to exclude others from being able to use the patented technology. Both Tesla and Toyota have spent significant resources on acquiring patent protection for their inventions. However, the companies have taken the rather unusual step of allowing free use of their patent portfolios in a bid to open up the market to wider adoption of their technologies.
For Tesla the hope is that other car manufacturers will use the technology to produce electric cars to grow the market. This should help to improve the general interest in electric cars and also to improve the charging station infrastructure needed to run the cars. Tesla sees conventional petrol and diesel cars (which still dominate the car production market by more than 99%) as their competition, not other
electric car manufacturers. In fact, some have suggested that Tesla aims to provide batteries to other electric car manufacturers and to become the world’s largest battery producer.
Toyota has an additional motivation, stemming partly from the lessons it has learned from the obstacles facing early electric cars: without suitable refuelling stations, hydrogen-powered cars cannot hope to enter the market as a feasible alternative. Indeed, while most of the patents will be available for use royalty-free until 2020, about 70 patents for installing and operating hydrogen fuelling stations will be available indefinitely. Additionally, the portfolio covers fuel-cell stacks, high-pressure hydrogen tanks, software control systems and the industrial processes involved in generating and supplying the gas. Toyota hopes that this will help to further refine new fuel-cell components to increase performance, reduce costs, and attract a broader market of buyers.
Can literally anyone use them?
Well, not quite. Naturally, having spent considerable resources on acquisition of the patents, the companies want to retain some form of control over the direction of subsequent development. Toyota confirmed that there will be an application process to check what the technology will be used for and then a royalty-free licence will be issued. Tesla’s brief blog statement was less specific, but included the caveat that the use of the technology must be ‘in good faith’. In this way, the companies can ensure that the technology is not used for commercially detrimental purposes or for morally uncertain purposes, which could include, for example, military applications.
Are patents still worthwhile?
With these car makers having spent the resources on building impressive patent portfolios, only to then grant royalty-free licenses, it is fair to ask whether it is worth obtaining patent protection in the first place. The answer is yes, absolutely. There were reports that, shortly after the announcement, both Nissan and BMW were in talks with Tesla. Without the patent portfolio to become the frontrunner in electric car battery technology in the first place, Tesla would not have had the bargaining power it now has to encourage development of its chosen market.
Posted on 28/04/2016 in Legal UpdatesBack to Knowledge