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Corporate Directors Changes October 2008 for Private Limited Companies

What is a corporate director? A corporate director is a director that is not a natural or real person. For example, if a company called ABC Group Limited owns a subsidiary called ABC Trading Limited it may have appointed ABC Group Limited as the director of ABC Trading Limited instead of a real person.

What is changing in October 2008? The Companies Act 2006 is being implemented in stages and as of 01 October 2008 sections 155 to 159 become effective. This section of the Act no longer permits companies to have only corporate directors. From 01 October 2008 all new companies must appoint at least one natural director i.e. a real person.

Why have the rules changed? 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.

What about companies that were in existence before 01 October 2008? To give existing companies time to accommodate this change the rules are being implemented on two dates depending on when a company was first registered and who its directors were on certain dates.

For all existing companies registered after 08 November 2006 – they must appoint a natural director by the 01 October 2008. The 08 November 2006 is significant as this is the date the Companies Act 2006 received Royal Assent.

For all existing companies registered before 08 November 2006 – they must appoint a natural director by the 01 October 2010. There are however additional criteria the company must fulfil before this 2010 date applies –
- On 08 November 2006 the company must have had at least one corporate director
- On 08 November 2006 the company must not have had any natural person directors
- If the company had no directors appointed on 08 November 2006 then it must appoint a natural person by 01 October 2008.

What should I do now? If your company has corporate directors you must assess which date applies to you and then make the necessary changes. This will require appointing a natural person at some point. This change should be notified to Companies House and amended on the Register of Directors.

What happens if I do not appoint a natural person by the required date? Your company will be in default and may be subject to penalties for failure to comply which includes fines up to £5000 for both company and officers in default plus daily default fines. The Secretary of State also has power to issue a direction requiring the company to comply with this section.

A company without an eligible director may also find it difficult to operate as the company may be considered not to be in good standing. It may not be possible to file accounts with Companies House as an eligible directors approval is required for accounts. Failure to file accounts on time will lead to additional penalties and fines.

For changes to underage director rules click here

Dated 23/07/2008

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