This consolidated corporate update summarises the major developments in UK corporate law and regulation which have occurred over the last six months and which will be of relevance to UK listed companies.

On the horizon: summaries of the most material developments expected in the next 6-12 months

Reform of Companies House – transforming Companies House from a largely passive recipient of information into an active gatekeeper – see item A1 below.

Hill Review package of reforms – implementing wide-ranging changes to the UK listing and prospectus regimes, including the Financial Services and Markets Bill and Secondary Capital Raising Review recommendations – see items C4, D2 and D3 below.

Audit and corporate governance reform – establishing the new "ARGA" and introducing amendments to the UK Corporate Governance Code – see item F2 below.

A. COMPANY LAW

1. Reform of Companies House

In September 2022, the Government laid the Economic Crime and Corporate Transparency Bill (ECCT Bill) in Parliament containing, among other things, draft amendments to the Companies Act 2006 to facilitate the reform of Companies House.

Enhanced role and greater powers for Companies House

The reforms will result in the biggest change in the role of Companies House since it was created, turning it from a largely passive recipient of information into an active gatekeeper. Under the draft Companies Act provisions in the ECCT Bill, Companies House will:

  • Power to query information – be given the power to query any filings (including company names) that appear erroneous, anomalous or suspicious, and which may impact the integrity of the register or the wider business environment. It will also have the power to request further evidence and/or to reject the filing;
  • Power to remove information from the register – have the power to remove material from the register more swiftly and in wider circumstances than is currently the case; and
  • Digital filing of information – be able to require all information to be filed electronically.

Identity verification

Identity verification requirements will be introduced for all new and existing company directors (and equivalents for other entities), people with significant control (PSCs) and those filing information with Companies House. UK company formation agents that register with Companies House will be able to conduct these checks. Directors and PSCs who do not verify their ID will commit a criminal offence and/or incur a civil penalty. Companies that have an unverified director will also commit an offence.

Limited partnerships

The ECCT Bill also contains provisions introducing registration and transparency requirements for limited partnerships, following reforms proposed by the Government in April 2018 to strengthen the legal framework and limit the risk of limited partnerships being used for illicit activities.

Amendments to the new Register of Overseas Entities owning UK property

The new Register of Overseas Entities owning UK property was introduced by the Economic Crime (Transparency and Enforcement) Act 2022 (ECA), which received royal asset in March (see item A2 below). Under the ECCT Bill, the ECA will be amended to expand the scope of the offences under it for delivering false or misleading information to Companies House.

The ECCT Bill will now proceed through the Parliamentary scrutiny process and will likely become law in the first half of this year. It is expected to be brought into force at a later date, so that Companies House can fully prepare for the reforms. An easy reference snapshot of the Companies House reform proposals can be found here.

2. Register of Overseas Entities owning UK property

The new Register of Overseas Entities owning UK property, introduced by the ECA, came into effect on 1 August 2022.

Under the ECA, overseas entities that own, or have a lease of more than seven years over, land or property in the UK have to be listed on a public register maintained by Companies House. Any overseas entity that becomes, or has since 1 January 1999 become, the registered owner of any UK land must go on the register.

In-scope overseas entities are required to:

  • take steps to identify their beneficial owner(s);
  • register basic information about themselves and their beneficial owner(s) at Companies House – and that information must first have been verified by a "relevant person" (such as an accountant or regulated company-service provider); and
  • update that information annually (or confirm that the information on the register is up-to-date), again with that information first having been independently verified.

Failure to register, or comply with the duty to update the information, in most cases will affect the ability of an overseas entity to sell or lease the land, or create a charge over it, as the other party would be unable to register the transaction with the Land Registry. The ECA also sets out various sanctions that could be imposed on the entity, including fines for directors if they fail to comply.

Companies House has issued some guidance and BEIS has published technical guidance, providing assistance on navigating the requirements on registration and verification. For further detail on the regime please see our briefing; we have also published a snapshot on how the regime will impact land transactions.

3. Directors' duties – Supreme Court ruling on duty to creditors

October 2022 saw the Supreme Court publish its long-awaited judgment in BTI 2014 LLC v Sequana SA and others ([2022] UKSC 25) which discussed when directors of a company in financial difficulties should consider the interests of the company's creditors. The majority of the Supreme Court:

  • affirmed the existence of the duty to consider the interests of creditors;
  • clarified that it is engaged where the directors know, or ought to know, that the company is insolvent or bordering on insolvency or that an insolvent liquidation or administration is probable; and
  • explained that where interests of creditors are engaged and diverge from those of shareholders:
    • if liquidation is inevitable, creditors' interests are paramount; and
    • prior to that, there will be a fact-sensitive balancing exercise to weigh up the competing interests by reference to the degree of distress.

For further discussion of the case, including the facts and best practice advice for boards, see the briefing published by our Restructuring, Turnaround and Insolvency team.

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