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Ian Defty, insolvency practitioner at DDJ Insolvency and formerly of the Insolvency Service, provides his views on how effective the government's proposals in relation to transparency in company ownership might be from an insolvency perspective.
Consultation: Transparency and trust--Enhancing the transparency of UK company ownership and increasing trust in UK business--Government response
A new central registry of company beneficial ownership information will be created by primary legislation, according to the government response to a consultation on transparency and trust in UK company ownership. In responding to the consultation, the Department for Business, Innovation and Skills (BIS) has also confirmed the creation of new bearer shares will be prohibited and the duties of company directors will be emphasised in order to make the consequences of acting as a 'nominee' director as a front for another person clear.
What are the main components of the proposals?
In his introduction to the response Vince Cable the minister for the Department for Business Innovation and Skills stated:
'We need business, investors and society to have trust in a system which holds accountable the minority who transgress, protecting the interests and reputation of the majority who do not. A lack of accountability--even a perception of a lack of accountability--can undermine faith in the legal framework which should protect the innocent majority when things go wrong.'
To support these aims the government have outlined what they intend to do and a brief overview of those proposals are detailed below.
A central registry of company beneficial ownership information
It will become necessary for companies to maintain and provide to a central register, maintained by Companies House, a detailed register of their beneficial owners. That is those who own or control more than 25% of a company's shares or voting rights or who otherwise exercise control over a company or its management.
Bearer shares and the opacity of company ownership
It is the intention to prohibit the creation of new bearer shares and those bearer shares already in existence will be required to be surrendered for conversion to registered shares.
Opaque corporate control through corporate directors
The government intends to prohibit companies becoming the director of other companies. Although there will be limited but specific exemptions.
Opaque corporate control through irresponsible 'front' directors
There will be a move with new legislation to improve the standard of information available in regard to directors' statutory duties to increase awareness by directors' of the duties that they have and the government will seek to ensure that the courts are required to take account
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