Small Business, Enterprise and Employment Bill: Corporate Directors and Pensions Trustees

Small Business, Enterprise and Employment Bill: Corporate Directors and Pensions Trustees


Author: Suzanne Burrell

The Small Business, Enterprise and Employment Bill is currently going through parliament. The Bill amends the Companies Act 2006 so that it will no longer be possible to appoint a corporate director to another company.

In the bill, there will be a power contained in the legislation to make regulations setting out exemptions to this providing for circumstances where corporate directors will be permitted. A specific exemption in relation to pension schemes is contemplated.

Earlier this year, we published a legal update regarding the government's response to its discussion paper on enhanced transparency of UK company ownership. One of the key proposals by the government was a ban on the use of corporate directors.

The Department for Business Innovation and Skills has published a paper discussing the scope of exceptions to the prohibition of corporate directors. The paper can be found here. The paper states that the government is "minded" to allow corporate directors of a corporate pension scheme trustee to continue. They are seeking responses to the following questions:

  • Can you provide any further information or evidence BIS should consider in relation to the abuses or value of corporate directorships in the pensions industry
  • Is there anything that should be done to improve the transparency of corporate directorships and corporate trustees
  • Can you provide any evidence of the costs and benefits of your preferred outcome

For many pension schemes it is common practice to use a corporate trustee to run the pension scheme. There are a number of reasons for using a corporate trustee including administrative simplicity and, perhaps more importantly, in the reduction of exposure to liability for individuals.

Additionally, it is becoming increasingly common for independent trustees to be appointed. Where the existing trustee is a corporate, a corporate independent trustee will be appointed as a director of that trustee company. Clearly a prohibition on appointment of corporate directors to trustee companies could create problems for those corporate trustees who have a corporate independent trustee appointed as a director.

A further reason why a scheme may use a corporate trustee structure is where an asset backed funding arrangement is put in place through the establishment of a Scottish Limited Partnership. Provided that the corporate trustee is in the same corporate group as the employer, the arrangement will benefit from an exemption in the Financial Services and Markets Act 2000 (FSMA), meaning that the operator of the arrangement, as a Common Investment Fund, will not require authorisation under the Act.

Unless the exemption is introduced, a prohibition on the appointment of a corporate as a director could create problems for pension schemes. Most schemes are set up on the basis that there are either individual trustees or a single corporate. Scheme sponsors may be reluctant to appoint an independent trustee unless they can be appointed as a director of an existing trustee company. A corporate independent trustee would not be part of the same group for the purposes of FSMA meaning that it would not longer be possible to rely on this exemption.

The concerns around the use of a corporate director, namely the potential to conceal corporate control, are not present in a pension schemes context. There are general statutory obligations and regulatory obligations imposed on trustees in the running of a pension scheme which apply to a corporate trustee. Given that the main reason for appointing a corporate trustee director is to facilitate appointment of an independent trustee, prohibition of this could lead to reduced good governance for some schemes.

Comments on the discussion paper are invited and the consultation will close on 8 January 2015. We will be responding to the consultations so if you have any submissions you would like to make on our behalf please contact Suzanne Burrell or your usual pensions contact.


This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.

About the author

contact photo

Suzanne Burrell


03700 86 8902

Suzanne is an experienced pensions lawyer advising both trustees and employers. Her experience encompasses all pensions issues including: auto-enrolment, pension scheme mergers and bulk transfers, pensions regulatory change, contingent assets for pension schemes and pensions funding. She has particular experience advising both charities and co-operative sector clients.

Share this page