Limited companies have started making the necessary enquiries of their members to ensure they are ready to enter accurate and complete information in a new, mandatory statutory register of Persons with Significant Control (PSCs) from April.
New company law requires every UK private company, and most UK public companies, to create a new statutory register of Persons with Significant Control from 6 April 2016. Failure to do so is a criminal offence.
A company’s PSC register is open to the public, provided inspection is for a proper purpose. From 30 June 2016, companies will also have to file information from their PSC register at Companies House on a regular basis.
The rationale behind the new rules is that publicising details about individuals who ultimately control or influence a UK company reduces the probability that they are using their companies for tax evasion, money-laundering or other wrongful activities.
A PSC is anyone who:
owns or controls, directly or indirectly, more than 25 per cent of the company’s shares or voting rights
has power, directly or indirectly, to appoint a majority of the directors of the company, or
can exercise ‘significant influence or control’ over the company
An individual is also a PSC if they can exercise significant influence or control over the policies or activities of any trust or firm whose trustees or partners would, if they were individuals, meet any of the above conditions.
If control is exercised directly by an individual, a company will enter the PSC in its register. However, if significant control is exercised through a legal entity (or a chain of legal entities), the company sometimes has to record one of the legal entities in its PSC register, rather than the individual.
By law, companies must take reasonable steps to find out if they have any PSCs and to identify them. They must give notice to each person (or legal entity) they know or have reasonable cause to believe should be recorded in the PSC register. Companies may also give notice to others who may know someone is a PSC, or know someone who does.
Given the deadline of April, many companies have started taking these steps now.
For a company with only a few members, who hold shares or voting rights directly, it will be easy to identify any PSCs. For companies with more complex ownership structures – for example, where shares are held in family or other trusts, by external investors or joint venturers – identifying PSCs may be more difficult.
Companies should also check whether any individual – whether inside or outside the company – has any rights to influence, control or veto the activities or decisions of their board or members, or specific actions or decisions such as appointing new directors. If the circumstances are unusual, the individual could be a PSC. This may mean reviewing the company’s constitution, and shareholder or other agreements which may contain such rights.
Virtually identical rules are also being introduced in relation to UK Limited Liability Partnerships. These will come into force on the same date.
6 April 2016
Companies should start making the necessary enquiries of their members to ensure they are ready to enter accurate, complete information in their PSC register from 6 April.
03 February 2016
Alex Cook is a Director at Helix. Alex initially trained academically as an unregistered barrister and was a Partner and Head of Civil Litigation at a large firm based in the South East before joining Helix Law. As well as focussing on expanding Helix, Alex specialises in commercial and property related litigation and he has acted for a broad range of clients including offshore property investment funds, small businesses and individual property owners.
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This article is written to raise awareness of the issues it discusses and it may not be updated after it is first written, even if the law changes. It is not intended to be legal advice and cannot be relied on as such. Helix Law is not responsible or liable for any action taken or not taken as a result of this article. If you think the matters set out affect you and you wish to apply them to your particular circumstances then we are happy to give you free initial telephone advice.