UK Register of Persons with Significant Control
Important changes are taking place in the UK which will have a significant impact on the privacy of information about the ownership of UK businesses.
In March 2015 the Small Business, Enterprise and Employment Act received the Royal Assent and introduced a number of significant changes with the stated aims of improving transparency of UK incorporated companies and making the UK a better place to do business.
One of the changes is the requirement for UK registered companies and limited liability partnerships (‘LLPs’), to maintain a register of people having significant control, the PSC Regulations. In January the draft PSC Regulations were placed before the UK Parliament for approval.
With effect from 6 April, 2016 most UK companies and LLPs are required to maintain a PSC Register which is available for inspection at the company’s registered office. From 30 June 2016 this information must be filed at Companies House on the PSC Register, which will be open for public inspection, and confirm the accuracy by filing an annual confirmation statement. The statement will take the place of the annual return.
A person with significant control is defined as an individual who, whether alone or jointly with a number of joint holders of a particular share or right, meets one or more of the following conditions:
1. Direct or indirect ownership of more than 25% of the shares of the company;
2. Direct or indirect control of more than 25% of the voting rights in the company;
3. Direct or indirect right to appoint or remove the majority of the board of directors of the company;
4. Actually exercises or has the right to exercise significant control or influence over the company;
5. Actually exercises or has the right to exercise significant control or influence over the activity of a trust or firm which meets one or more of the conditions listed at 1 to 4.
The details to be recorded are the PSC’s name, address for service and residential address, date of birth and nationality. The PSC’s residential address and full date of birth, however, are not available to the public. In addition, the nature of the individual’s control over the company, by reference to the percentage of their shareholding and the date when the individual became a registerable PSC must be stated.
With respect to ultimate ownership by Trusts it seems from the draft guidance notices that the PSC will be the trustee itself, as they normally exercise control over a Trust; unless there is a person who has the right to exercise significant influence or control over the trust.
To maintain the PSC Register companies are obliged to take reasonable steps to identify those individuals that it knows meet the conditions, but also those that it suspects meet the conditions of having significant control.
Information can be obtained by the company by giving notice to PSC’s and, where necessary, third parties to obtain that information. If the company is unable to obtain a reply to its request it has the right to disenfranchise the shares or impose restrictions on the shares held by that individual.
Penalties, a fine or imprisonment or both, will be imposed on a company and its directors and officers that fail to act to obtain the information to complete and maintain the accuracy of the PSC Register. Where there has been a registerable change to the PSC that event must be recorded as soon as reasonably practicable after learning of the change or reasonably believing there has been a change.
The legislation also imposes a duty on those who are or reasonably know they are PSC’s to provide the required information to the company, even if not requested by the company, within one to two months of discovering the change or the date of the change.
It should be noted that these regulations only apply to UK registered companies and LLPs. Excluded from the PSC Regulations are UK companies with voting shares traded on certain markets in the US, Japan, Switzerland, Israel and regulated markets in EEA member states. Such companies are already required to meet the disclosure obligations of those markets and provide information of major shareholders that is available to the public. The PSC Regulations do not apply to foreign companies that do business in the UK.
The UK government has published detailed non-statutory guidance for companies and trusts on how to comply with the new register of persons with significant control (PSC) which can be found here.
EU member states will shortly have to consider whether or not to put in place similar public records of ownership of businesses. This results from the implementation of the 4th anti-money laundering directive, which is due to be transposed by the Member States into national legislation by 26 June 2017 and will be directly applicable in any Member States from the same date.
In addition the EU has also announced at the beginning of February that it wants member states to advance the introduction of the 4th Directive to June 2016 (instead of June 2017).
For more information on this subject please contact Peter Brigham firstname.lastname@example.org