In a significant and topical increase in the requirement for corporate transparency from 6th April 2016, UK companies & LLPs are required to identify, record and publish who are their ultimate beneficial owners and people with significant control by the introduction of the requirement to maintain and file a register of Persons with Significant Control (PSC).
The Small Business, Enterprise and Employment Act 2015 introduces the requirement for UK companies & LLPs unless subject to other disclosure requirements to take reasonable steps to identify those whom they know or suspect to have significant control. This includes those who own or control, directly or indirectly, more than 25% of a company’s shares or voting rights.
Given that the individual or individuals who control a company are often different from those listed on the company’s register of shareholders, in many cases, the PSC register will look quite different from, and be a much more informative document than, the shareholder register.
From 30 June 2016 the PSC register must be filed at Companies House each year. As part of the Confirmation Statement which replaces the Annual Return, the PSC register will be available for public inspection and will be searchable online via Companies House.
This is a fresh approach to the topic because prior to the PSC Register, only a full record of the details of anyone who currently held their shares was required. The PSC Register will enable transparency of who has actual control and prevent camouflaging who truly has control.
Who is a person with significant control?_
A person or relevant legal entity will be a PSC if he/she/it:
- directly or indirectly owns more than 25% of shares
- directly or indirectly holds more than 25% of voting rights
- directly or indirectly has the power to appoint or remove the majority of the board of directors
- has the right to exercise or actually exercises significant influence or control
- has the right to exercise significant influence or control over the activities of a trust or firm, the trustees or members of which meet one or more of the conditions set out above or would do so if they were individuals.
Identification and inspection_
Once a company has identified those whom it knows or suspects to have significant control it must give notice to the person requesting confirmation of their position and any relevant information. Potential PSCs are also obliged to notify the relevant entity if it has not received a notice and update certain changes to their details.
The register must be available for inspection by anyone upon request. It may be maintained at Companies House but must then be kept up to date at all times, otherwise, changes should be notified when the annual Compliance Statement is filed.
Even if there is no interest to be registered (or a company is dormant), a register must still be kept.
What will appear on the register?_
The PSC Register will detail the:
- Service address
- Usual residential address (this will not appear on public record)
- Country, state or area of the UK in which the person usually resides
- Date of birth
- Date the individual became a PSC
- Nature of the PSC’s control
- Whether the individual has applied for their information to be protected from public disclosure of all persons or other companies with a significant interest in the company.
What are the penalties?_
Failure to comply may result in a fine or imprisonment if committed by the officers and a possible disenfranchisement if it is the individual who fails to declare himself as a significant person.
The completion of the PSC Register could be time-consuming, especially as the implementation has an international reach. Regardless of a person’s jurisdiction disclosure must be made on the PSC Register.
Action should be taken now as early preparation for this significant change in corporate governance will undoubtedly be beneficial.