Corporate directors no more

The next phase in the recent raft of changes to company law has been postponed yet again but once in force  shall require all directors of a company to be natural persons. This means that, from the commencement date companies shall be prohibited   from having another company as a director..

Companies House confirmed at their forum on Wednesday that the commencement date for the ban on corporate directors shall not be October 2016 as planned.

The change is part of a general plan to create more transparency in corporate structure. In October 2008, the rules were changed to require each company to have at least one natural person as a director (previously a company could have all corporate directors). In April 2016, new registers were introduced to identify people with significant control over a company.

The overall aims are to reduce the ease with which complex tax schemes can be hidden behind layers of corporate veils and to increase accountability of those in control.

Historically, corporate directors have been useful, especially in large groups of companies, to avoid the need to appoint different natural persons when roles change and to provide alternatives when one natural person is unavailable or incapacitated. However, it has also too often been used to help those in roles of responsibility to avoid or mitigate accountability.

Soon, a company will no longer be able to appoint a corporate director. Those who already have corporate directors will have one year to remove and/or replace them before they are automatically removed from the register.

Any companies who currently have corporate directors should therefore prepare for the changes without delay.