jurisdiction

1. Are members of the armed forces permitted to hold shareholdings in private companies, including startups, provided that they do not participate in management?

There is no overarching legislation governing the ability of members of the armed forces to hold shares or act as company directors. Instead, the position is governed by the relevant King's Regulations and Queen's Regulations applicable to each branch of the armed forces.

Members of the armed forces may generally hold shareholdings in private companies, including startups, provided they do not participate in management and no conflict arises with their official duties.

Royal Navy Regulation J.8412 (Investments) expressly provides that:

"Crown servants may hold any stock, shares or other investments, unless such holdings conflict with their official duties."

The regulatory framework therefore proceeds on the basis of general permission, subject to conflict-of-interest considerations.

2. Is notification or approval required before acquiring a shareholding or establishing a company?

The regulations distinguish between passive investments and active business involvement.

For passive investments, service personnel who hold investments that could reasonably be perceived as creating a conflict of interest must disclose those investments to their Commanding Officer as soon as practicable. This is a disclosure obligation rather than a prior approval requirement.

The position differs where the individual's involvement extends beyond passive ownership. Establishing a company, acting as a company director, managing a startup or otherwise undertaking active business activities generally requires prior approval from the relevant military authorities.

For example, Royal Navy Regulation J.8402 prohibits regular service personnel from accepting continuous paid employment or becoming a member of the governing body of a company without prior Ministry of Defence or Naval authority. Equivalent provisions exist within the Army and Royal Air Force regulations.

Accordingly, active involvement in a startup will generally require prior approval, whereas passive share ownership will typically only trigger disclosure obligations where a conflict of interest may arise.

3. Are there any notable limitations, thresholds or conflict-of-interest rules?

There is no express monetary or percentage threshold for permissible shareholdings.

The relevant test is qualitative and focuses on whether the investment creates, or could reasonably be perceived as creating, a conflict of interest with the individual's official duties.

Particular scrutiny applies where:

  • the service member has official dealings with the company;
  • access to official information could benefit the company or the individual's private investment; or
  • the company has, or seeks to have, contractual relationships with the Ministry of Defence.

The regulations provide a graduated response where conflicts arise, ranging from disclosure requirements and restrictions on dealings in the relevant investment through to, in more serious cases, a requirement to dispose of the interest. Failure to comply may result in disciplinary or administrative action.

Additional considerations arise where the company participates in public procurement procedures. Under the Procurement Act 2023, contracting authorities must identify and manage actual and potential conflicts of interest affecting individuals involved in procurement processes.

Post-service restrictions may also apply. Senior officers and warrant officers are required to consider whether approval is needed under the Business Appointment Rules before accepting new appointments after leaving service. These requirements generally apply for two years following termination of service.