Starting on 6 April 2016 UK companies, LLPs and Societates Europaeae ("SE") will need to keep a new register of ‘Persons with Significant Control’ ("PSC register"), which must be filed annually at Companies House from 30 June 2016.
The requirement to keep a PSC register has been introduced by the Small Business, Enterprise and Employment Act 2015 (the "Act")
The government has published a summary of the new requirements which may be found here as well as full statutory guidance which may be found here.
The definition of "significant control" is considered below. Although the rules also apply to LLPs and SEs, for simplicity this article will refer only to companies. For more information on the application to LLPs or SEs, please contact Hewitsons’ Corporate Team at the contact details below.
What are the new requirements?
Under the new regime companies must:
maintain a register of PSCs; take reasonable steps to identify any PSCs and obtain/update their relevant details; make their PSC register available for public inspection at their registered office (or another address notified to Companies House) and respond to requests for copies; and file details of any PSCs annually to Companies House.
A person (including a company) who knows (or ought reasonably to know) that they should be included on a company’s PSC register, has a duty to notify the company and must keep the company up-to-date with any subsequent amendments to their details. A person failing to do so, or who makes a recklessly false statement about their details, will be guilty of an offence under the Act.
Where can I find a template for the PSC register?
Hewitsons’ specialist Company Secretarial service will be happy to provide a template for the PSC register, on request.
Who needs to be identified on the PSC register?
The new rules ensure that there will be a public record of whom has significant control over a company, no matter whether the individual exercises control directly or indirectly.
The intention is to create a public record of the ultimate beneficial owners. This might be, for example:
- the identity of those who own shareholdings in parent companies;
- the identity of those who control a company via entities such as trusts; or
- the identity of any offshore companies who control UK companies.
Are some companies exempt?
A company will be exempt from the requirement to maintain a PSC register if:
a) the company is subject to Chapter 5 of the Financial Conduct Authority’s Disclosure and Transparency Rules ("DTR"); or
b) the company has voting shares admitted to trading on a regulated market in the UK or European Economic Area (other than the UK) or on specified markets in Switzerland, the USA, Japan and Israel.
However, it is important to note that the rules may apply to UK subsidiaries of such companies.
What if another company is a PSC?
A company ("SubCo") may include another company ("HoldCo") on its PSC register, if HoldCo has significant control of SubCo, but only if HoldCo is itself is a UK company maintaining a PSC register, or is exempt (as above). In this instance, it would not be necessary for SubCo to include details of the ultimate beneficial owners of HoldCo on its register – it will simply give the details of Holdco and anyone inspecting the register could then inspect Holdco’s register (or their disclosures under the DTRs or listing rules).
If HoldCo is not maintaining its own PSC register (and is not exempt) – e.g. if Holdco is an offshore company - then SubCo’s PSC register must include all those individuals who ultimately exercise significant control of SubCo by holding a "majority stake" of HoldCo.
If HoldCo were not actually a company but a non-legal entity (such as a trust) then essentially the same rules apply as if it were an offshore company. SubCo’s PSC register must include all those individuals who ultimately exercise significant control of SubCo by holding a majority stake of the HoldCo Trust.
How will this apply to different corporate structures?
SubCo (a UK registered company) is the wholly owned subsidiary of HoldCo Ltd (a UK registered company which maintains its own PSC register).
Mr X holds 25% of HoldCo’s shares. SubCo does not need to include Mr X on its PSC register, but would instead add Holdco to the register. Anyone seeking to discover the details of those who control SubCo would then look at HoldCo’s register, which would contain details of Mr X.
SubCo (a UK registered company) is the wholly owned subsidiary of HoldCo plc (a UK registered company with voting shares listed on an EEA stock exchange).
Mr X holds 25% of HoldCo’s shares. SubCo does not need to include Mr X on its PSC register, but would instead add Holdco to the register. Anyone seeking to discover the details of those who control SubCo would then look at information published by HoldCo in accordance with the relevant listing rules.
SubCo (a UK registered company) is the wholly owned subsidiary of HoldCo (a non-exempt offshore company).
Mr X holds 51% of Holdco’s shares. Since HoldCo will not maintain its own PSC register and is not exempt, SubCo cannot add HoldCo to the register, but will be required to include details of Mr X on its own PSC register.
Mr X is a sole trustee of the X Family Trust, which owns 25% of the shares of SoleCo (a UK registered company).
SoleCo cannot include non-legal entities on the register, but must instead include Mr X as he exercises significant influence or control over the non-legal entity which in turn exercises significant control of SoleCo.
What is "significant control"?
A person with significant control is a person who:
either alone or with others, holds directly or indirectly more than 25% of the company's shares, or the right to more than 25% of the company's capital or profits; or either alone or with others, holds directly or indirectly more than 25% of the voting rights of the company; or either alone or with others, holds directly or indirectly the right to appoint or remove a majority of the board of directors; or has the right to, or actually exercises, significant influence or control over the company; or has the right to, or actually exercises, significant influence or control over any trust or firm (which is not a legal entity) which has significant control over the company under one of the four conditions mentioned above.
What exactly is meant by "significant influence or control" is not clear. The government has published further draft guidance on this definition, with examples, which can be found here. Broadly, it is the ability to direct actions of the company or to ensure the company adopts desired activities.
What if the company does not know who its PSCs are?
The Act includes a new duty on companies to investigate, obtain and update information on registrable persons and registrable legal entities. A company must take reasonable steps to find out if there is anyone who is a registrable person in relation to it, and give notice to anyone whom it knows or has reasonable cause to believe to be a registrable person requiring that person to state whether they are a registrable person and supply particulars.
There is also a duty on the registrable persons/legal entities themselves, if they know or ought reasonably to know that they are registrable persons and they are not already included on the company’s PSC register. Such persons will therefore be required to check the registers of companies they control to ensure that their details are included.
For more information or for a template PSC register please click here to email a member of Hewitsons’ Corporate Team.