October 21, 2010
From 1 October 2010 all companies in the UK have been required to have at least one natural person as a director. In other words, the Board of a company may no longer consist entirely of corporate directors.
Previously, it was perfectly possible for a parent company to be the only director of one or more of its subsidiary companies. The rationale for the change is that there should be at least one person who can be held to account for the company’s actions, rather than being able to hide behind the façade of another limited company.
This change has been phased in over the last couple of years. Companies incorporated after 8 November 2006 had until 1 October 2008 to appoint at least one natural person as a director. Companies incorporated before 8 November 2006 had until 30 September 2010 to make the appointment.
A company which has not complied with the 30 September deadline may be directed by the Secretary of State to rectify the situation within a time period of between one and three months after the date on which the direction is given. Failure to comply with any such direction renders both the company and any director in default liable to a fine of up to £5,000 default plus an additional daily default fine for continued contravention.
A company which continues without at least one natural director may run into difficulties with filing the annual accounts with Companies House, as those accounts need to be approved by the directors. Late filing of accounts gives rise in turn to further penalties and fines.
Action: review the structure of the Board of your company and of any holding or subsidiary companies, including any companies that are dormant. Where any Board is made up only of corporate directors, a natural person should be appointed immediately in accordance with the provisions for the appointment of directors set out in the company’s articles of association. Companies House Form AP01 will also need to be signed by the new director, countersigned on behalf of the company and filed at Companies House.
For more information, please contact Catherine O'Riordan, Solicitor in Spratt Endicott's Company Commercial Department on 01295 204150 or email her on co'riordan@se-law.co.uk
