The Serious Fraud Office claims that corporate directors contribute to complexity which, in their opinion, facilitates crime in one quarter of their cases. Germany and Australia are among the few countries which do not allow corporate directors at all.
Exceptions to the rule
There will be exceptions to this prohibition, but these are yet to be finalised.
In order to obtain feedback from businesses on their views on exceptions, BIS published a consultation in 2014. Initial feedback suggests that a company may be permitted to appoint a corporate director if both of the following conditions can be satisfied:
- all of the directors of the corporate director entity are natural persons (i.e. individuals); and
- certain details of the individual directors of the corporate director should be included in a publicly maintained and accessible register.
Once the Regulations are finalised, companies will have a one year grace period within which to remove any corporate director and replace them with a natural person where appropriate (until October 2016).
What do we need to do at this stage?
As already mentioned, the Regulations setting out the exceptions are yet to be published. In the meantime, companies should begin by reviewing their group structures, identify any corporate directors within them, and ascertain who the directors of that corporate entity are.
Once the exceptions are concluded, any corporate directors which do not fall within an exception will need to be replaced or removed. Companies should also check that any appointment and removal of directors as part of this exercise is done in accordance with the company's articles of association (eg as to the minimum number of directors, etc).