Last year the UK Government sought views on improving transparency and accountability in the corporate world. One proposal in the interests of transparency was to ban the use of a corporate director – a director being a company rather than an individual. In the pensions field many independent trustees provide their services via a company and so the law in this area is of particular interest to independent trustees.
Government’s response April 2014
As previously reported, the Government recently published its response to comments on its July 2013 consultation. There is, generally speaking, to be a complete prohibition on corporate directors. Once new legislation comes into force UK companies will no longer be able to have a ‘corporate director’ on their board of directors and instead directors must be individuals and not legal entities such as a company. However the Government recognises that in certain specific business areas corporate directors provide particular benefits. Therefore there will be a limited number of exemptions to the prohibition.
The exceptions will be where there are high standards of governance or high levels of regulatory oversight. The present list of proposed exemptions is:
- group structures including large listed companies or large private companies; and
- charities.
Disappointingly, the exemption list does not at the moment include pension schemes. However all may not be lost. There is a footnote mentioning the Government is also considering exemption in relation to different classes of legal entity. It is unclear whether this relates just to different types of charity structures or may embrace other organisations such as pension fund trustee boards.
Action point
Independent trustees supplying their trustee services through companies have time to lobby Government, particularly as there is no set legislative timetable. Government says it will introduce the new legislation as and when Parliamentary time allows.
By Clive Weber