Corporate Director Ban

Sep 16, 2016
You may or may not be aware that the Companies Act 2006 allows companies to appoint corporate directors. Corporate directors are companies or organisations who can act through an individual representing them. They can also be shareholders. However, the recent changes to the Small Business, Enterprise and Employment Act 2015 is going to change this. Corporates will still be able to be shareholders, but they will no longer be permitted to be directors. The change means that directors have to be only a natural person, unless one of the exceptions applies. 

The reasoning for this change is to supposedly allow for corporate transparency, as part of a Government wide campaign. 

The changes are due to come into force in October, but it has been difficult to have any information on the proposed exceptions. Companies House has updated its website to say the following: "You won’t be able to appoint corporate directors, although there are some limited exceptions. The detail of these exceptions are still under development. Any further information including a date for implementation will be provided on GOV.UK as soon as it’s available”.

Until such exceptions are known, it would be prudent for you to review all your directorships at the companies you operate in, while keeping a close eye on the developments of the exceptions, which are hopefully due to be published next month, to coincide with the new legislation coming into force. 

Nicola Lucas

About the author

Nicola Lucas

Nicola is a member of our Business Law Team handling all the commercial requirements of her clients such as shareholder agreements and negotiating on commercial ...

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