Delay to the abolition of corporate directors in the UK

The abolition of corporate directors in the UK has been postponed pending the publication of draft regulations detailing exemptions to the legislation.

Currently, a company can appoint a corporate director as long as one of the directors of the company is a natural person. Under changes required by the UK Small Business, Enterprise and Employment Act 2015, implemented in a quest to improve transparency and trust in UK company ownership and control, the abolition of corporate directors in the UK was expected to be implemented in October 2016. However, implementation has been delayed, as the Government considers circumstances where exceptions to the ban may be considered – for example, certain group structures including large listed companies; or if all the directors of the corporate director are all natural persons.

A transitional period will exist for those companies who already have corporate directors. They will have 12 months following implementation to replace any existing corporate directors; however, following the transitional period any corporate directors who do not meet the exemption criteria, will cease to be directors.

The Government has confirmed that draft regulations detailing the exceptions will be published “as soon as it is available”. Until such information is available, all UK-registered companies should review the composition of their boards of directors, and consider making arrangements to replace any corporate directors with natural persons.

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