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Limit on Corporate Directors: Consultation Opens

The Department for Business, Energy and Industrial Strategy has opened a consultation on the Government’s proposed approach to restricting the use of corporate directors as part of its larger package to enhance corporate transparency, reform Companies House and fight economic crime in the UK.

On the one hand, corporate directors may be seen to weaken corporate governance by preventing individual accountability yet on the other, they may be a useful and legitimate option.

The law as it stands requires that only one director on a company’s board be a “natural” person and any number may be corporate directors. Provision to prohibit the use of corporate directors was made in the Small Business, Enterprise and Employment Act 2015 but this has yet to come into force. Accordingly, the consultation is looking at what exceptions to the prohibition on corporate directors should be introduced so as to achieve an effective balance between their legitimate and “smoke-screen” use.

  • The Government intends to introduce regulations that create a “principles” based exception to the prohibition. The principle is essentially that a company can be appointed as a director if:
    all of its directors are, in turn, natural persons; and

  • those natural person directors are, prior to the corporate director appointment, subject to the Companies House identity verification process.

Responses are due by 03 February 2021

© Copyright 2022 Squire Patton Boggs (US) LLPNational Law Review, Volume X, Number 346
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About this Author

Andrew Glaze Corporate Transactional Attorney Squire Patton Boggs Birmingham, UK
Partner

Andrew Glaze is a partner in our Corporate Practice Group based in our Birmingham office. He has over 17 years of experience advising clients on the full range of corporate transactions.

Andrew specializes in mergers and acquisitions and corporate finance transactions including takeovers, mergers, reconstructions and joint ventures and has advised in connection with a number of hostile and recommended public takeovers and equity market fundraisings.

Andrew provides specialist advice to FTSE, AIM and private groups in relation to all aspects of company law and regulatory...

44 121-222-3032
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