Appointment of new directors – consent to act and notification of their duties

The Government has recently introduced the Small Business, Enterprise and Employment Bill to Parliament (“SBEEB”).

One of the proposed changes relates to the current ‘consent to act’ requirement on forms notifying the appointment of a director or secretary to Companies House. The ‘consent to act’ system currently requires either the appointee’s signature on a paper form, or, for electronic filing, an online personal authentication process. The Department for Business, Innovation and Skills (BIS) has concluded that this procedure is outdated, citing around 400 cases a year in which a person makes an uncontested claim in the courts never to have been a director of a company.  The new proposals will enable Companies House to deal with such cases administratively.

Instead of the ‘consent to act’ procedure referred to above, BIS proposes that this is replaced by a ‘statement of truth’ made by the company when filing a notice of appointment at Companies House, that the person has consented to act as a director/secretary. Companies House will then notify new directors of their appointment giving them the opportunity, if they did not in fact agree to take on the role, to apply for it to be removed from the public record, thereby providing a means of resolving disputes about directors’ appointments.

Whilst it will be some time before the changes come into effect, companies are advised to review their procedures for appointing officers in preparation for the planned changes. Companies will need to retain their own evidence of a person’s agreement to become a director or secretary and this could take the form of a signed ‘consent to act’ template or a service contract.  In the event of a dispute, Companies House would be able to request that the company submits that internal evidence and take action to amend the register if it fails to do so. Companies are also advised to review their board procedures and resolution templates for appointing directors and secretaries, to ensure that resolutions refer specifically to the company’s obligation to make a ‘statement of truth’ and that each individual ‘consent to act’ document is laid before the Board to enable it to make the ‘statement of truth’.

As part of the communication Companies House proposes to send to new directors verifying their appointment, Companies House will also provide directors with details of where to find information, or who to consult, about their statutory duties under the Companies Act 2006 and other legislation. This is a useful addition and responds to concerns that more should be done to communicate directors’ legal duties to them, as well as the implications of failing to comply with them.   

Corporate Governance

Author: Vistra Corporate Law