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prohibition on corporate directors – what’s the latest?

16 January 2019

As we have previously reported, the provisions of the Small Business, Enterprise and Employment Act 2015 (SBEEA) will require all company directors to be natural persons and prohibit the appointment of corporate directors (subject to certain exceptions). The SBEEA also provides that the appointments of existing corporate directors will automatically cease after a 12 months grace period.

The implementation date for these provisions has now been delayed several times – and currently we still do not have a confirmed date for when these provisions will go live or final details of what the exceptions to the prohibition will be. However, it is still widely expected that this ban will come into force in the not too distant future - and Companies House confirmed in its published Business Plan for 2018-2019 that it intends to work with BEIS to implement the prohibition.

Currently the Companies Act 2006 states that a company must have at least one director who is a ‘natural person’ – so provided a natural person is appointed one or more corporate directors (i.e. a company or an LLP appointed as a director) are also allowed. Once the ban is implemented, all directors would need to be natural persons, unless one of the (not yet finalised) exceptions applies – and acting in breach would constitute a criminal offence. This explains why many companies making use of corporate directors at the moment are monitoring developments here closely to ensure they are geared up to comply with the new law once in force.

Whilst we await a further announcement on the implementation date for the ban – and the likely exceptions – corporate groups would be advised to double-check which UK group companies have any corporate directors and keep a list of these to hand. This will facilitate a quick assessment of whether any of the exceptions apply once these details are published and an action plan can then be quickly drawn up to ensure compliance.

At this stage it would also be worth considering any knock-on consequences of the potential removal of any corporate directors (for example on a company’s constitution or the balance of power on board decision making) to see whether any further changes are necessary or desirable. Some companies are also choosing not to appoint new corporate directors at this stage, as it is likely that such appointments would need to be revisited in the near future.

training and events


In-house lawyers' update Manchester office

Our next in-house lawyers' sessions will give in-house lawyers the tools and strategies for dealing with some of the problems caused by recent changes to the law.

View event


In-house lawyers' update Nottingham office

Our next in-house lawyers' sessions will give in-house lawyers the tools and strategies for dealing with some of the problems caused by recent changes to the law.

View event

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An introduction to EMI share options

Share options granted under the Enterprise Management Incentive Scheme (usually referred to as EMI options) are a popular choice for SME and start-up companies who want to reward and incentivise employees in alternative ways to simply paying them more amounts of cash.



An introduction to EIS and SEIS tax efficient investing

Where a start-up or SME company is looking for external investment, and one or more individuals are looking for investment opportunities which can provide significant tax advantages, it is well worth considering the Enterprise Investment Scheme (“EIS”) or the Seed Enterprise Investment Scheme (“SEIS”).


How to have a settlement discussion with an employee - hear from Kerren Daly

The Acas Code on settlement agreements provides limited guidance on how to conduct settlement agreement negotiations with an employee


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The Information Commissioners Office flexes its muscles: first fines under the GDPR

After much speculation about what the first fines issued by the Information Commissioners Office might be we have seen two significant statements of intention to fine in the same month


The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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