Register of People with Significant Control The implementation dates for important changes to the Companies Act 2006 being made by the Small Business, Enterprise and Employment Act 2015 and regulations made under that Act are fast approaching.
A key change requires the disclosure of information relating to the people who control companies. Some entities are exempt, including public companies with shares listed on certain stock exchanges, including the AIM or Main Market of the London Stock Exchange. These entities may however be required to disclose their ownership and control of other companies in their group.
This summary refers primarily to companies, but note that adapted versions of these requirements also apply to UK limited liability partnerships and Societates Europaeae.
Timing
The key dates are:
Who are PSCs?
People with significant control include:
The requirement includes individuals who exercise significant influence or control over a trust or partnership (which is not a legal entity) which meets any of the above requirements and rights and interests are aggregated for individuals who are party to arrangements to exercise their rights together.
A person is treated as holding shares or rights indirectly if they are held through a legal entity which holds shares in the company (or through a chain of legal entities) in which the individual holds a majority of the voting rights, can appoint or remove a majority of the directors or over which he or she exercises or has the right to exercise dominant influence and control.
Statutory Guidance from the Department of Business, Innovation & Skills on the meaning of "significant influence or control" is currently in draft form. The draft guidance includes the following:
In this context, "absolute" in relation to a decision right or veto means that a person has the ability to make or veto a decision without reference to or collaboration with anyone else.
What are relevant legal entities?
Where a company (subsidiary) is owned or controlled by another legal entity (parent), such as another company, details of that entity should be included on the PSC register if it is a relevant legal entity, which will be the case if meets any of the conditions for an individual to become a PSC (for example, it holds more than 25% of the voting rights) and:
There is then no requirement for subsidiary to enquire further into the ownership of the parent.
This means that listed companies (UK and certain overseas listed companies), unlisted UK companies and UK limited liability partnerships can be relevant legal entities and entered on the PSC register. However, unlisted overseas companies will not be relevant legal entities, their details will not be entered onto the PSC register and UK companies will need to look further up their ownership chain for information for the PSC register.
Example: Parent and Subsidiary are English private companies and so each will be required to maintain a PSC register. Subsidiary is a wholly-owned subsidiary of Parent. Subsidiary's PSC register will only need to list Parent and not any owners/controllers of Parent. The content of Parent's PSC register will depend on its ownership and control. |
Some companies will have more than one PSC, others will have no PSCs but must still maintain the register.
If a company does not have any PSCs, it must state this in its new register – the register is not allowed to be blank. The register must then state:
"The company knows or has reasonable cause to believe that there is no registrable person or registrable relevant legal entity in relation to the company"
On 6 April, 2016, when the requirement to create and maintain the register takes effect, unless a company knows the identity of any PSC and relevant legal entity (and for an individual has confirmed that information with them), it should enter the following holding statement in its PSC register:
"The company has not yet completed taking reasonable steps to find out if there is anyone who is registrable or a registrable relevant legal entity in relation to the company"
Process
Companies (other than those which are exempt from the requirement) must take reasonable steps to determine whether an individual or legal entity needs to be included on its PSC register. It may be that these individuals and entities cannot be identified, but failure to take reasonable steps to identify them is a criminal offence (see below).
The process recommended by the Department for Business, Innovation & Skills is to:
A PSC or relevant legal entity may also contact a company to advise that its details need to be added to the PSC register. An individual PSC or relevant legal entity is also under an obligation to identify itself as a PSC or relevant legal entity. It must provide the company with the relevant details, if it knows, or ought reasonably to know that it is a PSC or relevant legal entity, it is not already on the register and it has not received a notice from the company within one month of becoming one. Failure to do so is a criminal offence.
The information to be entered on the PSC register for an individual PSC includes their name, date of birth, nationality, country or state (and in case of the UK, the part) in which they usually reside, service and residential address, date of becoming a PSC and which of the conditions to becoming a PSC the person satisfies (plus the band of percentage interest where relevant (the banding need only specify a range - over 25% up to and including 50%, over 50% and less than 75% and 75% or more)).
The information to be entered on the PSC register for a relevant legal entity includes its name, registered or principal office address, legal form and governing law, registration number and register, the date it becomes a relevant legal entity and which of the conditions to becoming a PSC it satisfies (plus the band of percentage interest, where relevant (using the bandings explained above)).
Information must then be updated when it changes – if a company is not yet able to enter the new information, its register should show the date when the old information became incorrect plus a statement of the investigation being undertaken in relation to the change. The company should then send notices to confirm the details of the relevant change if those details are not otherwise provided to it.
A company should check that the information on its PSC register is up-to-date at least annually so that it can be confirmed on its annual confirmation statement.
Public disclosure
From 30th June 2016, information from the PSC register must be included when a company files its next annual confirmation statement and on incorporation of a new company.
A company must disclose a copy of its PSC register (excluding details of any residential address) to anyone who requests it unless it believes that the request was not for a proper purpose.
Criminal offences
Companies which are subject to the new requirement must comply with the relevant provisions or the company and every officer in default may be liable, on conviction, to a fine and/or two years imprisonment.
There is also an obligation on PSCs to provide the required information to the company or risk being convicted of a criminal offence. These are strict liability offences. There is no defence available to a company or PSC or any of their directors or other officers for an inadvertent breach of the obligations.
Detailed guidance on these requirements has been published by the Department for Business, Innovation & Skills and can be found here.
Draft statutory guidance on the meaning of "significant influence or control" over companies can be found here.
If you would like advice from Bird & Bird on the applicability of these requirements to your business, please do not hesitate to contact a member of our corporate team.