With effect from 1 October 2008 every company must have at least one director who is a natural person – ie an individual. The reason behind this change is to ensure that there is at least one individual who can be held responsible and accountable for the company's actions. It means that a private company will not be able to have a sole corporate director – or indeed a board comprised only of corporate directors. There were many concerns about this change, because sole corporate directors are commonly used in group situations and by formation agents. As a result, the Government has agreed to the following concession, but this only operates for a limited period.
The concession delays the operation of this new provision to 1 October 2010 if:
(a) on 8 November 2006 (the date that the Act was implemented) none of the directors were individuals; and
(b) the company had the correct number of directors on that date (ie 1 for a private company, 2 for a public company).
Penalties for failure to comply with this section include fines of up to £5,000 on the company and any officer in default and daily default fines. The Secretary of State also has power to issue a direction requiring the company to comply with this section
What should you be doing now?
• Identify which, if any, of your companies currently have no individuals on the Board of Directors.
• Check whether the Board on 8 November 2006 fulfilled the conditions above. If it did, you need to do nothing until 1 October 2010.
• If it didn't fulfil these conditions on 8 November 2006 you will need to appoint an individual to the Board before 1 October 2008.and decide whether you will also keep the corporate director(s) in place.
• You should also check that the appointment of the individual does not exceed the maximum number of directors allowed by the company's articles.
• If you replace your corporate director with an individual, check that your articles allow you to quickly appoint a new director if your individual dies or resigns suddenly.
• If your company is administered by Jordans and you are affected by this change we will shortly be contacting you to explain the options open to you.
• If you need more information or help in appointing another director or establishing whether the concession applies to you please contact Helen Goose.
For more information please contact Helen Goose on 0117 918 1322 or email her at helen_goose@jordans.co.uk.
