Out-Law / Your Daily Need-To-Know

UK could limit directorships to reduce criminal activity

Out-Law News | 02 Jun 2019 | 7:00 am | 1 min. read

The UK government could limit the number of directorships people can hold at once in a bid to reduce criminal activity and increase the transparency of companies.

A consultation (80-page / 631KB PDF) proposes legislation to cap the number of board roles one individual can hold. An exception may be necessary for company formation agents, but no mention is made of large groups where one individual often represents the parent on many subsidiary boards.  

The consultation also proposes identity verification for directors and possibly shareholders that could be similar to anti money-laundering checks run by prospective clients of banks and law firms.

The information gathered will be used to link records across the register, so potentially providing a picture of all an individual's directorships and shareholdings.

It is hoped that this will help to combat criminal activity such as the use of UK companies for money laundering, corporate names that suggest connections with well-known brands, the filing of false information and identity theft.

The consultation would also limit the number of times a company can shorten its accounting period, a device that has been used as a way of postponing the filing of accounts. Such reforms would amount to the biggest change to the companies register since it was introduced in 1844. Companies House registers contain details of four million registered companies, 6.6m directorships and 8.3m shareholders.

In a separate development, from 10 June proxy advisors will be required by law to name and report on any code of conduct they apply, and explain if they don't follow such a code, disclose their research capabilities and how they produce their voting recommendations, and disclose any conflicts of interest or business relationships that may influence their research.

Proxy advisors publish recommendations for how shareholders should vote at AGMs, and the new law, the Proxy Advisors (Shareholders' Rights) Regulations 2019, implement part of the Shareholder Rights Directive II.

Join Pinsent Masons at the Devonshire House Summer Panel Debate: 'Should NEDs stop things going wrong?' Limited complimentary tickets available from Ugne Cicinskaite.

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