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Abolition of corporate directors

 The abolition of corporate directors is one of the more controversial changes being implemented by The Small Business, Enterprise and Employment Act 2015 (the “Act”), which received Royal Assent on 26th March 2015.

The UK Government’s view is that despite section 155 of the Companies Act 2006 (Companies required to have at least one director who is a natural person) there remains a lack of transparency and accountability with respect to those controlling a company which can facilitate illicit activity and erode trust.

Section 87 of the Act seeks to address the Government’s concerns and introduces a requirement for all directors of UK companies to be individuals, save for some limited exceptions. These exceptions are yet to be confirmed, however, we are aware of the possibility that corporate directors may be authorised to be appointed where the corporate director itself only has human directors or natural persons appointed.

It has recently been confirmed that this particular change to legislation has been pushed back to October 2016, furthermore, there will be a transition period of a further 12 months during which existing companies with a corporate director in place can remove it or replace it with an individual. If a company does not do so, and does not qualify under the exceptions, then that corporate entity ceases to be a director upon the expiry of the 12 month period.

For further information please contact

Ross McGregor on 0131 226 8221

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