“Reducing red tape – a red herring” , our article of 27 July 2014, queried the value of some of the corporate commercial changes proposed by the Small Business, Enterprise and Employment Bill currently making its way through parliament.
As part of the legislative process, the Department of Business, Innovation and Skills (BIS) has considered the compatibility of the proposals with the European Convention on Human Rights (ECHR). Red tape maybe, but the process brings to the fore the rights and freedoms on which businesspeople rely.
Take the proposal to prohibit corporate directors, that is companies, rather than actual people, holding directorships of companies. “How can we hold dodgy directors to account if we don’t know who they are?” asks the BIS document; albeit not in these words. It actually says: “Corporate directors can obscure identification and liability of those who control companies, with the potential for criminal activity and poor corporate governance.” Which sounds good. It is only right though that the government weigh this up against Protocol 1 Article 1 of the ECHR – the right to peaceful enjoyment of one’s property; or put another way: who are the government to tell shareholders whom they can and cannot appoint as directors? The BIS document says the proposal is proportionate and thus does not infringe Protocol 1 Article 1, but it is easy to lose sight of business people’s core rights when the “potential for criminal activity” and “poor corporate governance” are invoked. Balance is key.
Or take the proposed obligation on companies to keep registers of people exercising significant control over them. The register will have to be available for inspection and contain the relevant individuals’ name, service and residential address(es), country of usual residence, nationality, date of birth and details regarding the control the individual exerts over the company. The proposal must be weighed up against Article 8 of the ECHR – right to respect for one’s private and family life, home and correspondence. In other words, I might say: yes, I have the power to remove a majority of the board of directors, but I negotiated that position on a commercial ‘level playing field’ – Who are the government to insist that my details go on a register for everyone to see? The answer (amongst a wider rationale): “helping law enforcement and tax authorities identify and sanction those who ultimately control companies that are used for criminal purposes, as well as potentially deterring the criminal misuse of UK companies”.
As always when appraising new regulatory proposals, balance is key and it is crucial not to lose sight of one’s core rights and freedoms. Businesspeople are free to appoint directors, strike deals and run the companies they own as they see fit. There are good reasons to curb these freedoms, but one must be vigilant that the justifications provided are indeed and do remain good reasons.
Please contact Harry Perrin if you would like to discuss any of the issues raised in this article. The information provided in this article is for general information purposes only and does not constitute legal or other professional advice and cannot be relied upon as such. Any law quoted in this article is correct as at 20 August 2014. Appropriate legal advice should be sought for specific circumstances before any action is taken. Copyright © Murrell Associates Limited, August 2014.