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Are you a person with significant control of a business? Be aware of new legislation

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The PSC or ‘persons with significant control’ register is a new statutory register which will effect UK Companies and LLPs from 6 April 2016 that will form part of the statutory books of the company. The register will contain details of ultimate beneficial owners and controllers, and details of company’s holding, which will ensure this information is available to the public.

The public availability of the register targets the Government’s objective to achieve transparency in the legal and beneficial ownership of UK companies, aiding the fight against tax evasion, money laundering and terrorist financing. Furthermore, the Government’s ‘transparency’ provisions are hoped to develop a climate of confidence amongst companies and consumers alike.

Are you affected?

The short answer is likely to be yes. Companies exempt to the new regime are few and far between with more or less all UK Companies obliged to keep at their registered office and make available for inspection a PSC register from 6 April 2016. The reach of the provisions extend to include all limited companies, SEs, wholly-owned subsidiaries, LLPs and charities to name but a few.

Those companies exempt are public companies traded on the LSE, AIM or ISDX that are subject to other rules in relation to the disclosure of their ownership structures.

Who are ‘persons with significant control’?

A person with significant control is any person (either alone or with others) that satisfies at least one of the following five conditions:-

  • Directly or indirectly hold more than 25% of the nominal share capital; or

  • Directly or indirectly control 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 exercise or have the right to exercise, significantly influence or have control over the company; or

  • Actually exercise or have the right to exercise significant influence or control over any trust or firm which has significant control over the company.

Where a legal entity would be regarded as having significant control over the company, then provided that the legal entity is itself under a disclosure obligation (such as under the PSC provisions) then the company concerned may enter the details of the legal entity and need not trace the ownership any further.

It is to be noted that in the situation where an individual has the benefit of a beneficial trust arrangement, the individual will be identified as a person with significant control and as such will be included in the register. Their details will therefore be on the public record from June 2016.

The implementation of the PSC provisions will see the end of corporate directorships as by October 2016 it will be mandatory for all directors to be natural persons and any appointment in contravention of this will be void. After one year of this provision being in place, any corporate directorships still in existence will automatically cease.

What needs to be recorded and where should it be made available?

Upon creation of the register, the following details of any PSC must be recorded:-

For individuals, the personal information of the PSC:

  1. Name

  2. Service address

  3. Nationality

  4. Date of birth

  5. Usual residential address

What the nature of their control is:

  1. Detail of which of the five conditions detailed above make them a person with significant control.

The information recorded will then be available for public inspection at the company’s registered office from 6 April 2016. In addition, companies must confirm their PSC register every 12 months at Companies House commencing 30 June 2016 and can elect to keep their register with the registrar. Safeguarding of the PSCs’ personal information has not been lost as only the month and year of birth will be available and residential addresses are not to be disclosed.

What are your next steps?

The duty of the company to hold a PSC register extends beyond the creation of the register. The company must take an active role in taking reasonable steps to identify PSCs through research and notifications to those who are, or could be, classed as PSCs. There is an obligation to maintain and keep up-to-date the PSC register and from a practical point of view, in the event of any material change in the structure of the company it would be prudent to carry out research into the identities of the PSCs of the company and send out requests seeking information on potential PSCs. The register must always be populated even in the event where no details of any PSCs are recorded. In this circumstance, it is necessary to record details of any investigation into those who are potentially PSCs of the company.

Non-compliance?

The importance of the register cannot be understated as any non-compliance with the requirements of the regulations can amount to a criminal offence. The company and any officer who does not comply with the regulations can be found liable, and a maximum custodial sentence of 2 years can be given to any non-compliant officers with fines being handed to companies. This failure to comply extends from the creation to the maintenance and updating of the register. Albeit details to be included in the company’s PSC Register are known, the attached additional PSC checklist will also need to be completed and returned, so we can complete the PSC Register with these details when we send out the company’s statutory books.

Details to be included in the PSC Register are not currently required to effect an incorporation and your incorporation will not therefore be delayed if you do not supply this information.
PSCs can also be found criminally liable in the event that when information is requested, they withhold, intentionally omit or provide incorrect information. The company also reserves the right to impose restrictions on the powers attached to any shares held by a PSC who is not compliant with a request for information.

If you’re unsure on any of the incoming regulations, or just need some guidance on getting the house in order before the changes come into effect, do not hesitate in contacting the Bermans Corporate team headed by Jon Davage (jon.davage@bermans.co.uk).