Action required by all companies and if you don’t then criminal sanctions may apply!
The ‘Register for People with Significant Control’ (PSC register) is the latest reporting requirement that has been introduced under the Small Business, Enterprise and Employment Act 2015 (SBEEA). This Act will require virtually all UK companies to maintain a register of those people who have significant control over the business and will come in to force from 6 April 2016. There are potentially very serious consequences for those that do not comply.
It is safe to say that whether you are a company or indeed an individual shareholder in a company this new regime will affect you.
What is the PSC register?
The PSC register is a public statutory register requiring all UK companies, limited liability partnerships (LLPs) and UK registered societas europaea (SEs) to identify and record the individuals who are the ultimate beneficial owners and controllers of the business. Where a corporate body (referred to as a relevant legal entity) has control over a business, their details should also be recorded on the PSC register. A ‘relevant legal entity’ (RLE) is considered as being an entity which would have been classed as a person with significant control, if it were an individual, and an entity which is subject to its own disclosure requirements (i.e. it too has to maintain its own PSC register).
Why has it been introduced?
The fundamental aim of the PSC register is to increase transparency over who owns and controls UK businesses and to deter and impose sanctions on those who attempt to hide their interest. The Government anticipates that the introduction of this new initiative in conjunction with the other measures relating to transparency contained in the SBEEA will help combat tax evasion and support law enforcement agencies in money laundering investigations. By enabling a clear picture of both the legal and beneficial ownership of a business to be formed, there will also be a benefit to private investors undertaking due diligence prior to potential investment in a business.
Who counts as a ‘person with significant control’?
An individual or relevant legal entity considered to have significant control must meet at least one of the following conditions:
- Directly or indirectly holding more than 25% of the nominal share capital;
- Directly or indirectly controlling more than 25% of the votes at general meetings;
- Directly or indirectly able to control the appointment or removal of a majority of the board;
- Actually exercising, or having the right to exercise significant influence or control over the company; or
- Actually exercising, or having 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.
What will a company be required to do?
Companies will need to ensure that they:
- Identify the people with significant control over the business, taking reasonable steps to contact the PSCs and confirm their information for the register;
- Record the PSC information on the company’s register. Where for some reason, the information cannot be provided you should ensure that other statements are made in explanation for this – the PSC register can never be blank;
- Provide this information to Companies House as part of the annual Confirmation Statement (which replaces the Annual Return process from 30 June 2016) in order for the PSC information to be available on a publicly searchable database; and
- Update the information on the company’s own register each and every time it changes and update the amended information at Companies House when submitting the next Confirmation Statement.
A company’s PSC register will need to be kept at its registered office and be available for public inspection, in the same way as for the existing registers of directors and members.
PSC register form
At the time of writing this article, there is currently no prescribed form which the PSC register must adopt. To assist our clients, Hunt & Coombs have devised a PSC register for their reference and future use. We welcome further requests by those interested in obtaining a copy.
In order to receive a copy of our draft PSC register, please click here to email your contact details to us so that we can contact you.
When do the new rules come in to effect?
The requirement to maintain a PSC register will come in to force from 6 April 2016. From 30 June 2016 companies will be required to include the PSC information in their annual Confirmation Statement at Companies House.
Non-compliance and penalties
In order to compile the PSC register, each company is under an expansive duty to take reasonable steps to identify if anyone is a registrable individual or registrable relevant legal entity and to record this appropriately. There are criminal penalties (including fines and/or a prison sentence up to 2 years) for non-compliance with these duties for both the companies and their officers, as well as the individuals or relevant legal entities concerned.
However, perhaps the likeliest deterrent to non-compliance on the part of the individual or RLE concerned comes from the prospect of losing their shareholding. Failure by an individual or relevant legal entity to respond to a company’s information requests may give the company the power (following a prescribed timeline of ‘warning notices’ and ‘restriction notices’ and without having to seek a court order) to disenfranchise any shares held by them. The legislation holds that such disenfranchisement could see the holder prevented from selling, transferring or receiving any benefits from their interest in the company – a potentially disastrous outcome. It is envisaged that upon providing the necessary information or an acceptable justification for not doing so, such restrictions would be lifted, however there may be no claw back rights or opportunities in respect of losses encountered during the disenfranchisement. Therefore, it is of vital importance that shareholders take note of the imminent changes now.
It is also important to note that where a company has not sent the necessary PSC information requests, the registrable individuals or legal entities concerned who know or ought reasonably to know that their details should be on the PSC register are under a statutory obligation to proactively inform the company of their interest. Under the new regime, it is not simply a case of waiting to be contacted.
What to do next?
In light of the above, what should your business be doing in preparation for 6 April 2016:
- Refer to the full range of guidance notes from the government available here;
- Request a copy of Hunt & Coombs’ draft PSC register by clicking here ; and
- Look out for the guidance note soon to be published by Companies House explaining the new Confirmation Statement and how this should be submitted.
Contact us
For further information on the above and practical advice on how to ensure your business complies with the new requirements, please contact our Company Commercial team who will be delighted to assist on 01733 882800.
The register has been prepared based on the law as at 5 April 2016 and care should be taken to check updates. The Act does not predetermine the form of the PSC register and care should be taken to ensure the content of the form is appropriate in any given situation. The form may be reproduced if unamended in its entirety. Copyright vests in Hunt & Coombs LLP of 35 Thorpe Road, Peterborough, PE3 6AG.
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