Persons With Significant Control Register
Author: Neil Pfister
What is the PSC Register and why has it been introduced?
From April 2016, nearly all companies and LLPs in the UK will be required to keep a ‘PSC’ or 'persons with significant control' register to ensure that the individuals who are its ultimate beneficial owners and controllers are identified, and crucially that details of their holdings in these companies and LLPs are made public.
Part of the Small Business, Enterprise and Employment Act 2015 ("SBEEA"), the aim is that it will help combat tax evasion, money laundering and terrorist financing by showing the full picture of both the legal and beneficial ownership of businesses.
When do they come into force and who do they affect?
The new rules will apply to nearly all UK companies (except with some exceptions for listed companies on certain stock markets). UK companies will have to maintain a PSC Register from 6 April 2016 and from 30 June 2016 they will also be required to include the information in the revised Annual Return (called a ‘confirmation statement’) at Companies House.
Who is a 'person with significant control'?
The question of what actually is a person with significant control has been hotly discussed. A person will be deemed as having ‘significant control’ if he meets at least one of these five conditions:
- directly or indirectly holds more than 25% of the nominal share capital; or
- directly or indirectly controls more than 25% of the votes at general meetings; or
- directly or indirectly be able to control the appointment or removal of a majority of the board; or
- actually exercises, or has the right to exercise, significant influence or control over the company; or
- actually exercises or has the right to exercise significant influence or control over any trust or firm (which is not a legal entity) which has significant control (under one of the four conditions above) over the company.
Statutory Guidance on SIOC for Companies/LLPs
The Government has helpfully prepared a “Statutory Guidance on SIOC for Companies” (and the equivalent guidance for LLPs), which is a series of examples of the types of relationships and roles which a person may have with a company (or LLP) which may lead to them being deemed a person of SIOC (Significant Influence or Control). It is worth saying that this also includes control over a trust or firm that itself has significant control. Further, it gives us a number of ‘safe harbours’ which are essentially examples of relationships which would not be deemed to fall under the regulations, such as:
- a person providing advice or direction in a professional capacity, such as a lawyer or accountant;
- a person engaged with the company in a third party commercial agreement, such as a supplier or customer or lender;
- a person who is an employee acting in the course of their employment, or who is a director of the company (including a director with a casting vote);
- a person exercising a function under an enactment, such as a liquidator; and
- a person who makes recommendations to shareholders on a one-off issue.
What needs to go on the PSC Register?
The PSC Register needs to record the names of individuals with significant control over a company/LLP and the names of legal entities with control. For this last part, a ‘relevant legal entity’ is a legal entity which:
(a) would have been classed as a person with significant control had it been an individual; and
(b) is subject to its own disclosure requirements (e.g. it has to maintain its own PSC Register).
Personal information: Individuals on a PSC Register will need to disclose name, service address, nationality, date of birth and usual residential address.
Details of the nature of the control exercised: Where a company has identified a PSC then the Register must use one or more of the “prescribed statements” to record which of the five conditions of significant control the registrable person or relevant legal entity meets. The extent of their holding of shares or votes must be disclosed by selecting one of three pre-set bands:
- greater than 25% but less than or equal to 50%
- greater than 50% but less than 75%
- greater than or equal to 75%
Status of investigations: Where a position as to ultimate control has not yet been determined, the PSC Register must include prescribed statements confirming that steps have been taken to identify registrable persons or legal entities and the position in relation to any restrictions notices issued.
An important point to note is that from 6 April 2016, a company's PSC Register must not be blank.
The Act also includes rules setting out when certain individuals need to be included on the Register – if you are in any doubt here, please do not hesitate to contact us.
What happens if you do not complete the Register?
Each company/LLP has a duty to “take reasonable steps” to find out if anyone is a registrable person or relevant legal entity and to identify them in the PSC Register. Companies/LLPs can be investigated for non-compliance. Failure to respond to a company’s enquiries give the company the ability (without a court order) to impose restrictions on any shares held by them.
There are criminal penalties for non-compliance with these duties for companies, their directors and any individuals or legal entities involved.
What this all means for your company/LLP
With numerous legislative changes to company filing requirements taking effect periodically over the next two years, it is extremely important that your company remains informed and updated in order to maintain its compliance with the law. Your Articles of Association and any shareholders’ agreement or arrangements you have internally between business owners should be checked to ensure that they are up to date and work best for you and the company.
If you have any questions regarding the above, please contact Neil Pfister either by telephone on 01483 411538 or by email: firstname.lastname@example.org or speak to another member of our Corporate and Commercial Team.