UK: Is Your Company Prepared for the New Requirement to Keep a Register of Persons With Significant Control?

Companies registered in the UK need to start preparing now to meet imminent new obligations to compile and keep a Register of Persons with Significant Control, or PSC Register. The new requirement is part of a global move to make the beneficial ownership of companies more transparent, in order to deter financial crime and other abuses.

Companies will need to keep a PSC register from 6 April 2016. From 30 June 2016, there will be a requirement to update Companies House annually about the persons on the PSC Register, and this information will be made available to the public. The information will be supplied via the company’s confirmation statement (which is expected to replace the annual return from 30 June).

The new requirements will apply to all UK incorporated companies except those listed on the London Stock Exchange or AIM or on certain regulated exchanges in other countries. The same rules will apply to limited liability partnerships (LLPs), with some modifications.

We cannot set out in full here the requirements for what must be entered on the register since the details are too intricate. However, to give a very broad indication, a Person with Significant Control (or PSC) is an individual who meets one or more of the following five tests in relation to the company:

1. Directly or indirectly holds more than 25% of the shares
2. Directly or indirectly holds more than 25% of the voting rights
3. Directly or indirectly has the right to appoint or remove directors holding a majority of votes at board level
4. Exercises, or has the right to exercise, significant influence or control (and there is statutory guidance (still in draft until 6 April) as to the meaning of significant influence or control)
5. Has significant influence or control over a trust/firm which would meet one of the first four tests if it were an individual

The PSC will be registrable if their rights are held directly. Different considerations apply if the rights are held indirectly (such as through a majority shareholding in another company). Sometimes a legal entity such as a company (termed a ‘relevant legal entity’ in the legislation) is registrable on a company’s PSC Register instead of (or sometimes in addition to) the PSC.

Where there is a straight forward UK group structure with a 100% ownership chain, generally each company will be required to register the holding company immediately above it, and only the ultimate holding company will be required to register those (if any) of the ultimate shareholders who are PSC(s).

In more complex groups it will be necessary to consider carefully which PSCs and/or legal entities are registrable. Complexities include: the involvement of trusts, firms or non-UK companies, minority holdings, situations where a PSC directly holds shares or rights in both a holding company and its subsidiary and where ownership and voting or other control reside in different persons.

All companies will need to keep a register, even if they do not have a Person with Significant Control, and the register must never be blank. If no-one is registrable on a company’s PSC Register, the register must contain a statement to this effect. If a company is still in the process of trying to ascertain any PSCs or relevant legal entities which may be registrable, the register must contain a status update to reflect this. There is a whole range of prescribed wording covering all the eventualities, and it is this wording which must be used when writing up the register. A company must keep its PSC Register available for inspection, and a set of rules similar to those applying to a company’s register of members applies to determine when, to whom and for what purpose, it has to grant access.

Companies are required to take certain steps from 6 April, including, if necessary, serving prescribed notices, to ascertain who is registrable. There are also obligations on PSCs and relevant legal entities to volunteer information to the company even if they have not been served with a notice asking for the information. As you may expect, this new regime is underpinned by the criminal law and non-compliance with the regime can mean the commission of various different criminal offences by a company, its officers and any registrable PSCs or relevant legal entities.

There will be a protection regime for information relating to PSCs. The default position is that their residential address will be protected from disclosure (other than to credit reference agencies and certain public authorities). However, it will be possible to apply to have all the information about a PSC, and even the fact they are a PSC, protected from disclosure if they can prove they are at serious risk of violence or intimidation as a result of the activities of the company or their link to the company. Individuals who wish to have all their information protected in this way should seek legal advice at the earliest opportunity.

This note is only a very high level summary of the new requirements. We recommend that you take a close look at the Government’s guidance.

Summary guidance

Full guidance

Draft guidance on meaning of significant influence or control (companies)

Draft guidance on meaning of significant influence or control (LLPs)

We understand that there will also be guidance on the information filing requirements from Companies House in due course.

If you require any further information, please do not hesitate to contact Manjot Shokar or Susan Sandford at Geldards Law Firm.