Legal Update: Changes to company law will affect charities

Plus: charity tribunal refuses to grant time extension

Small Business, Enterprise and Employment Act 2015
Small Business, Enterprise and Employment Act 2015

The Small Business, Enterprise and Employment Act 2015 makes significant changes to company law, which governs charities that are companies and charity trading subsidiaries. It received royal assent on 26 March and is being implemented in stages. Here are some relevant measures of the act.

Directorships

Currently, a company or other corporate body can itself be appointed as a director of a company, provided it also has at least one "natural person", meaning a human being, as director. The act's ban on appointing corporate directors, making any such appointments void, is due to come into force in October. Proposed regulations will make some exceptions to this, but it has not been confirmed whether charities will be among them. The act also amends the disqualification of directors regime to strengthen the rules that prevent individuals from acting as directors where they have committed misconduct.

Significant control

In an attempt to increase transparency, the act requires all companies (other than publicly traded companies and those excepted by regulations) to keep a new register of individuals and legal entities who have "significant control" over them. This is defined as directly or indirectly holding more than 25 per cent of a company's shares or voting rights, or having the right to appoint or remove a majority of a company's directors, or having the right to exercise - or actually exercising - "significant influence or control" over a company.

Guidance on the register is due to be published by October, and the requirement to keep the register is expected to come into force in January. Companies will then have to make the information public at Companies House by April.

Administration

The act includes various measures designed to simplify company administration, including giving private companies the option to keep information about their members, directors and company secretaries on the public register at Companies House, rather than in separate registers, and removing the annual return requirement (see page 52 for more on this).

Tribunal appeal timing

The charity tribunal has refused to grant an extension of time to allow a former charity chair to appeal against a decision of the Charity Commission made before the charity's dissolution. The tribunal decision provides a salutary reminder that notice of appeal must be received by the tribunal within 42 days of the date that the commission makes an appealable decision, irrespective of whether the regulator then offers an internal review of its decision. The tribunal said the would-be appellant could have made an appeal to the tribunal within 42 days and then applied for a stay of proceedings pending the outcome of the commission's decision review.

This column is written by Adrian Pashley, charities editor at Thomson Reuters, Practical Law, on behalf of the Charity Law Association

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