The Secretary of State for Business, Innovation and Skills (Vince Cable)
Today I am publishing a discussion paper which sets out a range of proposals to enhance the transparency of UK company ownership and increase trust in UK business. These measures will help prevent illegal activity; better enable companies to be held to account; and provide businesses, investors, employees and consumers with confidence that companies are acting fairly. They will support the development of a business environment where companies and individuals can operate and invest with confidence.
The first part of the paper puts forward measures to ensure we know who really owns and controls UK companies, following our G8 commitments on preventing the misuse of companies. The main elements of this section of the paper include:
Options for the implementation of a central registry of information on companies’ beneficial ownership, maintained by Companies House. We propose that the registry would hold information on individuals with an interest in more than 25% of the shares or voting rights in a company, or who otherwise control the way the company is run. We consider whether information in the registry should be made public, what information is to be provided and how it is to be updated.
A proposal to prohibit the issue of bearer shares. Bearer shares allow the owner of the shares to remain hidden as their name is not disclosed on a company’s register of members. The paper proposes that holders of existing bearer shares should be given a set period of time to convert these shares to ordinary registered shares.
Options to enhance transparency around the use of nominee directors, including whether they should be required to disclose their status to Companies House and who they are acting for. While nominees can be used in legitimate commercial scenarios, their use can allow the true owners of a company to remain hidden.
A proposal to abolish companies from being appointed as directors (“corporate directors”). Although rarely used in the UK, these can result in complex corporate ownership structures which hide the beneficial owner’s true identity.
The second half of the paper discusses disqualification rules and tackling directors who break the rules. This is especially important in the light of the corporate failures that took place during the financial crisis. The main elements of this section of the paper include:
Considering whether to amend the duties of bank directors so that there is a greater emphasis on the responsibility to promote financial stability (following the recommendation made by the Parliamentary Commission on Banking Standards).
Extending the factors taken into account by the court in disqualification proceedings. For example, allowing the court to consider the social impact of a director’s actions, breaches of sectoral regulation and previous business failures when coming to a disqualification decision.
Proposals to give courts the power to make compensation awards against a director when making a disqualification order; and to allow liquidators to sell or assign fraudulent trading actions.
Offering directors education classes or training at the end of their disqualification or a slight reduction in this period if they take up the offer.
Extending the time limit for when disqualification action must be taken. Currently standing at two years, the paper proposes a new five-year limit to take into account more complex insolvency cases.
Changing laws to prevent directors disqualified overseas from being a director of a UK company. The paper also considers allowing disqualification action to be brought against a director convicted of a criminal offence in relation to an overseas company.
The paper invites views from all interested parties by 16 September 2013. It is intended that measures will be implemented through, and at the same time as, transposition of the fourth EU money laundering directive and changes to company law. I will seek to introduce reform by the end of this Parliament.
I remain committed to reducing regulation and burdens on business and will consult on a range of company law deregulatory proposals in the autumn. These proposals will be developed in parallel to measures outlined in this paper to deliver a cohesive package of reform.
I have today also published two further documents. First, the terms of reference for a review of pre-pack administrations. The review will specifically look at whether pre-packs encourage growth and employment and provide value for creditors. Defined as an administration where the assets are sold before an administrator is appointed, concerns have been raised in the past that pre-packs are not transparent, that assets may be sold at below value, that there are conflicts of interested and they unfairly affect competitors.
Secondly, a report on the review of insolvency practitioners fees by the independent reviewer. Emeritus Professor Elaine Kempson of Bristol university. The findings are that where experienced, and usually secured, creditors are in control of proceedings, IP fees are successfully monitored. Where the creditors are unsecured and disparate, controls over fees are not working. The Government will respond to the report later this year.
I have placed copies of the consultations and further details of the appointments in the Libraries of both Houses.