The government has announced proposals to boost transparency and trust in British business with tougher rules and penalties for disqualified directors.
It is hoped that the greater transparency and accountability offered by the new proposals will help to tackle tax evasion, money laundering and the financing of terrorism.
The main elements of the company ownership reforms include:
- A publicly accessible central registry for the purpose of sharing information on companies maintained by Companies House. The registry will hold details such as the name of beneficial owners who control the company. Companies will need to supply these details to Companies House when incorporating and update them at least once every 12 months.
- Currently, bearer shares can be transferred without having to register ownership. The government intends to abolish these shares, given the potential for misuse. Once bearer shares are prohibited, existing bearer shareholders will be given a set period of time to surrender their shares for conversion to registered shares.
- When deciding whether a director should be disqualified, the courts and the Insolvency Service will take into account the nature and the extent of harm caused by that director as well as any overseas misconduct. This means that the authorities will be able to seek a director’s disqualification if that person has been convicted of a relevant criminal offence overseas.
- Other measures designed to improve trust in the UK disqualification regime include raising the time limit for commencing disqualification proceedings from two to three years from the earliest insolvency act, and giving courts the power to order negligent directors to compensate creditors who have suffered identifiable losses if their business fails.
- Making sure that directors are aware of their statutory duties from the start. The government will contact directors to make sure they have understood their duties and the legal ramifications when they start. This will help increase the accountability of those who control a director.
All the measures included here are just proposals and will require legislation to be passed.
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