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In a bid to tackle the use of UK companies to facilitate illegal activities, the Government has introduced measures to increase transparency in the ownership and control of companies. The register of people with significant control (PSCs) introduced by the Small Business, Enterprise and Employment Act 2015 as outlined in a previous blog comes into force on 6th April 2016.

The new regime requires UK companies and Limited Liability Partnerships (LLPs) to maintain and publish a public register of people with significant control over the business. All UK companies and LLPs will need to adapt to the changes and ensure that they comply with the legislation, as a failure to do so could result in criminal sanctions being imposed on the company’s directors.

 

Who is a PSC?

The rules for establishing whether an individual is a PSC are complex and the Government’s guidance is drafted widely. A PSC is anyone in the company who:

  • owns more than 25% of the company’s shares or voting rights;
  • has the right to appoint or remove a majority of the board of directors;
  • has significant influence or control over the company;
  • has significant influence or control over a trust or firm (in the case of shares held by trustees or a trust or by members of a partnership).

In order to determine whether someone has “control” or “significant influence” the Government has published guidance on what this means. “Control” means the power to direct the policies and activities of a company and “significant influence” means that a person can ensure that the company adopts those policies or activities which are desired by the holder of the significant influence.

Significant influence or control can be exercised directly or indirectly; whether created through the company’s articles of association, shareholders’ or investment agreement, share rights or otherwise. This covers individuals who have these rights but chose not to exercise them. Statutory guidance aimed specifically at individuals who may be PSCs will follow in due course.

 

What information will be made public?

There is a duty on companies to investigate, update and maintain the register and a corresponding duty on all PSCs to provide the information to the company. The following information must be recorded in the register:

  1. The individual’s name, service address, country or state of residence, date of birth and usual residential address (although this address will be recorded on the company register, it will be protected from view on the public register).
  2. The date on which the individual’s usual residential address and date of birth will be kept on the company’s register but will be protected from the view of the public register;
  3. The date on which the individual became a PSC and the nature of their control.

The information on the PSC register will also need to be confirmed to Companies House at least every 12 months and will be held by it on a publically searchable database.

From 30th June 2016, information from the PSC register must be included when a company files its next annual confirmation statement.

 

Failure to comply

If the PSC fails to respond to the company’s request for information, the company has the power (without obtaining a court order) to disenfranchise the PSC and impose restrictions on them. This includes loss of their right to vote and transfer rights.

There are also criminal sanctions for companies, their officers and PSCs who fail to comply with their duties, which include an unlimited fine and up to two years imprisonment. However, in reality the threat of disenfranchisement and impact this may have on the PSC and the company is likely to be the most effective form of deterrent.

 

What to do next…

If companies have not already began gathering information on their PSCs they need to act now to ensure their register is in place by 6th April 2016.

If a company has concerns about their PSCs details being on a public register, the PSC may consider applying under the Companies House protection regime. This regime is intended to protect those PSCs, or a person who lives with a PSC, from public disclosure where such disclosure may put them at serious risk of violence or intimidation.

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For further information or to discuss reviewing your corporate structures contact Ed Barnes, Head of Corporate & Commercial on 01244 354 829 or by email edward.barnes@dtmlegal.com.

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