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Register of people with significant control

From 6 April 2016 UK incorporated companies and LLPs must maintain a register of ‘people with significant control’.

The 'persons with significant control' (PSC) register is a new statutory register which UK incorporated companies and LLPs must maintain to identify the individuals who are the ultimate beneficial owners and controllers, or record the fact that there is no PSC. The register must be filed with Companies House from 30 June 2016, even for dormant companies, and most of the information in it will be available to the public. Failure to comply is a criminal offence. Previously, companies only needed to record the registered owners of their shares.

Who is a PSC?

A PSC is an individual who meets one (or more) of these conditions:

  1. Directly or indirectly holds more than 25% of shares in the company.
  2. Directly or indirectly holds more than 25% of voting rights in the company.
  3. Directly or indirectly holds the right to appoint or remove a majority of the board of directors of the company.
  4. Has the right to exercise, or actually exercises, significant influence or control over the company.
  5. Where a trust or firm would satisfy one of the first four conditions were it an individual. Or any individual holding the right to exercise, or actually exercising, significant influence or control over the activities of that trust or firm.

The last two conditions only apply in limited circumstances.

Information required

The details required to be included in the PSC register are:

  • Name
  • Date of birth
  • Nationality
  • Country, state or part of the UK where the PSC usually lives
  • Usual residential address (held on the register but not publicly available)
  • Service address
  • Date of becoming a PSC in relation to the entity (for existing companies or 6 April 2016 when the legislation came into force if a PSC already at that date)
  • Which of the above conditions for being a PSC are met. For conditions 1, 2 and 5, this should include the level of the PSC’s shares and voting rights within the following bands:
    • over 25% and up to 50%
    • over 50% and less than 75%
    • 75% or above.

Before a PSC can be entered in the register the directors must confirm all the details with them.

Group companies

If the company is owned or controlled by another group company which keeps its own PSC register, then this immediate shareholder or ‘relevant legal entity’ (RLE) is recorded in the company’s PSC register, and the company is not required to look further up its corporate chain.

If the company is owned by a non-UK company or an entity not required to maintain a PSC register, then the ownership or control will need to be considered to identify any individuals who have a majority stake in that entity. Someone is considered to have a majority stake if they meet any of the following criteria:

  • hold a majority of the voting rights in the legal entity.
  • are a member of the legal entity and have a right to appoint or remove a majority of its board of directors.
  • are a member of the legal entity and control a majority of the voting rights by agreement with other shareholders or members.
  • have the right to exercise, or actually exercise, dominant influence or control over the legal entity.

This exercise is repeated up the group structure if there is a series of non-UK companies with majority stakes, until an owner can be entered onto the register, or it can be concluded that no one meets these criteria.

LLPs

The PSC regime also applies to all UK incorporated LLPs. The conditions are similar to those above for companies in terms of rights to more than 25% of surplus assets on a winding up or holding more than 25% or voting rights. Rights set out in the LLP agreement, or any other agreements alongside the LLP agreement, will need to be considered.

Listed companies

Companies admitted to trading on a regulated market, or UK companies listed on AIM or ISDX have their own transparency rules. However, any unlisted subsidiaries would need to maintain their own PSC register in each case identifying their immediate shareholder or RLE.

Companies without share capital

The PSC register requirements apply to all companies including companies limited by guarantee and unlimited companies. In respect of a charitable company limited by guarantee, as it cannot distribute profit or capital it will have no PSC who meets condition 1; however the other conditions above will still need to be considered.

Joint interests and joint arrangements

If two or more people own the same shares in joint names, the company needs to work on the basis that each of them holds the total number of shares held by all of them. So, if two people jointly hold 30% of the total shares or voting rights, each of them must separately be entered on the PSC register.

Similarly, if two or more people have a joint arrangement to exercise all, or substantially all, of their rights from their shares jointly or in a pre-determined way, each of them is deemed to hold the total number of shares held by them, and each party is entered separately on the PSC register.

Keeping the register up-to-date

The information on the company’s PSC register must to be kept up-to-date and included in the annual Companies House ‘confirmation statement’, which will shortly be replacing the annual return. Under the EU Fourth Anti-Money Laundering Directive, which has to be implemented by all member states by 27 June 2017, changes to a company’s PSC register will have to be notified to Companies House immediately. In view of the 23rd June vote to leave the EU it isn’t known how this will apply.

Enforcement

A company is required to take reasonable steps to contact its PSCs and confirm the information in the register. There are penalties for the company and its directors for failing to take such reasonable steps and it is also an offence for a PSC not to provide the information required. These penalties can include up to two years’ imprisonment and a fine.

Specific advice should be obtained before taking action, or refraining from taking action, on any of the subjects covered.

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