User:Eteb3/ideas/ECCTA23

Changes to UK company law 2023 onwards

The Companies Act 2006 is the primary legislation governing the OSMF and OSMUK entities.

It's had a huge overhaul recently, and there are changes that are relevant to us.

The legislation

The amending legislation is the Economic Crime and Corporate Transparency Act 2003. As I understand it, all the amendments are now incorporated into the text of the Companies Act ("latest version", top left), but most/many new provisions are not yet in force. (That is, they're on the statute book, but not yet effective as law.)

Companies House is in the driving seat for implementation, with the minister responsible signing orders that bring in the changes in dribs and drabs, as and when CH processes are up to speed - or so it seems observing from outside.

CH gives a rough timetable stretching to 2027 for implementation. (Summary by a commercial law firm.)

Changes

Changes that are significant as I read them all relate to the register of members:

1. There is a new duty on companies to somewhat proactively ensure their members' register is accurate - previously it was on the member to do so if they wanted full-strength rights.
2. There is a new duty on members to supply certain information to the company so the register can be accurate. (113D-E)
3. There are new criminal sanctions on individuals to enforce both of these duties. (113G-I)
4. Members will soon be able to provide "a service address" for the register: currently they have to provide an "address". (113A)

Some changes will be achieved by secondary legislation. One that is well worth watching is the new 120A, which would prohibit a company from revealing information about members in circumstances yet to be specified. Companies House suggests a direction of travel in its plan for the period to March 2025:

We’ll develop processes that enable the suppression of personal information from the register, including suppression of the company’s registered office address, if it is a person’s residential address. We will also enable changes that will allow people who are personally at risk, rather than at risk due to the activities of the company, to apply for protection of their information. (source)

If they make good on this, then what follows on OSMUK allowing members to use the company address as a service address may be needlessly complicated. (On the other hand, it seems unlikely that the register will be private even to other members, even if it's protected from public eyes; so perhaps the privacy problem will remain.)

Relevance

Assuming we work to the primary legislation only (i.e., we ignore what requires secondary legislation, since this depends on ministerial priorities and CH capacity), then...

Point 4 above seems the most germane given that:

1. The register of members will in principle continue to be disclosable* to anyone who requests a copy;
2. Some people are understandably reluctant to have their details liable to be disclosed, and therefore do not want to become members, hence OSMF and OSMUK offer (confidential) associate membership;
3. Associate membership adds complexity to governance: the rights held are weaker, and it can also can be confusing;
4. It seems generally desirable in a member-controlled org to have a membership as broad and as deeply engaged as possible, with as many people as possible having full-strength rights.
5. It's the new "service address" that will appear in the register, but there is no obligation for this to be a home address.

Recommendation

We should watch developments over the next six months or so, and if the currently public register becomes private, problem solved.

If not, OSMF and OSMUK could offer members the opportunity to use the company's own address as their service address to preserve their privacy. People who are happy to have their name disclosable, but not their address, could then "graduate" from associate membership to full membership.

Any downsides?

If anyone is ever required to give notice to a member in hard copy, this will have to be served at the company's address, and so, on the face of it, the notice would never reach the member. Of course the company could tell the member in some other way that the member has mail, but it may not be in the company's interests to do so, and it has no duty to do so.

As to notices the company itself needs to send to a member, OSMUK's article 49.1 permits electronic service of documents. But the article doesn't require it, so it's just about imaginable that rogue directors could take advantage to ensure that notices, though legally valid, never reach members.

Similarly, members bringing an action to restrain the directors or otherwise enforce their rights may need (for legal reasons) to communicate with each other in hard copy, and a notice would (probably) only be validly served at the service address. In very many cases members know the online identities of company members, so they could reach them online - but not always.

Just about the only other time I can imagine the service address being used for hard copy would be during a liquidation, when the liquidator might ask members to cough up their £1 guarantee. But this wouldn't be worth their stamp.

Dealing with the downside

The articles could be changed so that any notice sent to a member in that capacity will have to be sent electronically. It might be worth asking the accountant whether that would be effective in law, or whether hard-copy service has to be an option.

* It's worth noting the recipient isn't allowed to publish the copy, or use it for any 'improper purpose'.

Oh and also...

The registered office of the company now needs to be an address where acknowledgement of delivery can usually be obtained.

Accountants with unstaffed premises, and residential addresses that are empty during the day, no longer qualify, with criminal penalties. See here for some discussion. See here for the statutory provision.