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Important update for businesses: The PSC register

Do you have ‘significant control’ over a company?

Whether you answered “yes”, “maybe” or even “I don’t know”, please read on because there are soon to be changes that might affect you. In fact, every company and every person with an interest in a company may be affected.

As part of the Government’s aim to increase corporate transparency, 6 April 2016 sees the introduction of the PSC register or, to give it its full name, the Register of People with Significant Control.

What is the PSC register?

Companies are already required to keep statutory registers that list, for example, details of directors and members. The new statutory register will require every company to record details of who owns and controls the company, and introduces an ongoing duty to keep these records up-to-date. As well as increasing transparency, it is also intended to help increase investor confidence and assist law enforcement agencies conduct money laundering investigations.

Who is affected?

From 6 April 2016, all companies and limited liability partnerships (and Societas Europaea registered in the UK) will be required to keep a PSC register. This information will also need to be filed at Companies House from 30 June 2016, as part of the company’s confirmation statement, which will replace Annual Returns.

There are also provisions affecting any individual who has, or may be considered to have, significant influence or control.

An individual is a person with significant control (PSC) if he or she meets, whether directly or indirectly, one or more of the following criteria:

  1. He or she holds more than 25% of the shares in the company.
  2. He or she holds more than 25% of the voting rights in the company.
  3. He or she holds the right to appoint or remove the majority of the board of directors of the company.
  4. He or she has the right to exercise, or actually exercises, significant influence or control over the company, but he or she doesn’t meet one of the conditions at 1 to 3.
  5. He or she has the right to exercise, or actually exercises, significant influence or control over a trust or another firm that satisfies one of the conditions above.

If you do not know the identity of your company’s PSC, then you must take reasonable steps to identify them. A PSC must be a natural person, although a legal entity (e.g. another company) may be entered onto the PSC register if it is ‘relevant and registrable’.

A legal entity is ‘relevant and registerable’ if it:

  1. Meets one or more of the conditions at 1 to 5 above;
  2. Holds its own PSC register or is subject to Chapter 5 of the Financial Conduct Authority’s Disclosure and Transparency Rules or it has voting shares admitted to trading on a regulated market in the UK or European Economic Area (other than the UK) or others specified markets; and
  3. Is the first relevant legal entity in your company’s ownership chain.

It is anticipated that there will be certain exemptions afforded to, for example, those providing advice or direction in a professional capacity (e.g. lawyers, accountants) and those involved due to commercial agreements (e.g. customers, suppliers), although whether or not the exemption applies will be determinable on a case-by-case basis.

Failure to comply

It’s important that you take reasonable steps to identify anyone who is a PSC for your company. It’s also important that, as an individual, you disclose information if you receive notice that you are, or may be, a PSC.

Failure to comply can result in an offence being committed by the company, its officers and/or the individual. Happily, the Institute of Chartered Secretaries and Administrators (ICSA) has, together with the Department for Business Innovation and Skill (BIS), published draft guidance to help. A summary of the draft guidance is available here, while more detailed draft guidance is available here. Although not yet approved by the Government, it is nevertheless a useful starting point for further information.

The PSC Register goes live April 2016

The PSC register comes into effect on 6 April 2016 and it requires every legal entity within scope to create and maintain a register of those people who can exercise significant control. Read more here.

CONTACT VANESSA

If you would like more information or advice relating to this article or a Corporate law matter, please do not hesitate to contact Vanessa Crawley on 01727 798104..

© SA LAW 2017

Every care is taken in the preparation of our articles. However, no responsibility can be accepted to any person who acts on the basis of information contained in them alone. You are recommended to obtain specific advice in respect of individual cases.