The Small Business Enterprise and Employment Bill received its first reading in Parliament on the 25 June 2014. The Bill aims to progress a number of Government commitments intended to further the UK’s reputation as a trusted and fair place to do business, and also to improve new opportunities for small businesses to operate and compete.
Among the new rules laid out in the Bill are clauses designed to strengthen the UK’s current governance system and deliver their G8 commitments to introduce new rules requiring companies to obtain and hold information on who owns and controls them. These measures are designed to increase trust and encourage investment growth in the UK.
Small & Medium Sized Business Credit Data
Lack of access to lending is a particular hindrance for small businesses; this is mainly due to the unwillingness of banks to share businesses’ past financial performance with Credit Reference Agencies (“CRAs”) and alternative finance providers. Clauses 4 and 5 of the new Bill will give the treasury power to make regulations imposing a duty on banks to provide this information to designated CRAs, and a duty on CRAs to provide this information to lenders.
VAT Data Sharing
Following HMRC consultation the government has decided to proceed with a controlled release of VAT data. The Bill will provide for the HMRC to release non-financial VAT data for the purpose of assessing creditworthiness, fraud risk or compliance with financial services regulations. The clause is permissive and allows conditions to be placed on any disclosure; for example, where data has been disclosed to a party, they may not provide this to a third party without specific consent from HMRC.
Streamlined Company Registration
The Bill sets in motion a commitment to developing a ‘one click registration’ procedure for establishing a new company in the UK, describing the current system as fragmented due to the several departments and agencies involved in the current process. The new process would mean a company would have to provide a single set of data once, and in digital form, which would register it at both Companies House and HMRC. The new registration process aims to be fully functional by May 2017.
Part 7 of the Bill contains measures influenced by G8 commitments to enhance corporate transparency in order to tackle the misuse of companies in the UK. Measures include:
- The introduction of a register of individuals who exercise significant control over a company;
- The removal and prohibition of the use of bearer shares;
- The prohibition of corporate directors except in certain circumstances; and
- Measures to deter opaque arrangements involving directors and to make individuals controlling directors more accountable.
These changes are to be codified in to the Companies Act 2006.
UK Directors Disqualification
Directors who have been convicted of a relevant foreign offence in relation to the running of a company abroad can now be disqualified from holding office in a UK company by way of a disqualification order initiated by the Secretary of State. They may also be disqualified if they are deemed unfit due to their conduct in relation to any matter connected with or arising out of insolvency.
Impact Of Small Business, Enterprise & Employment Bill
The Bill is still in its early stages with a further committee stage and report stage before it will reach the House of Lords, therefore it remains to be seen how many of its provisions will remain unchanged before it gets to the final stage of Royal Assent. The Bill contains a substantial number of updates and amendments to existing law and it will take some time for businesses to get to grips with these, but the Bill at this early stage seems set to strengthen the UK’s reputation as major business hub.