Legal update: register of people with significant control

Background

On 25 January 2016, the draft Register of People with Significant Control Regulations 2016 (“Regulations”) were published and laid before Parliament for approval. The Regulations reflect the government’s proposals, following the introduction of the Small Business, Enterprise and Employment Bill on 25 June 2015 (“SMEE”), that companies should hold, and have available for inspection, a register of ‘people with significant control’ (“PSC”) over the company. This register is known as the PSC Register (“Register”).

The PSC Regulations will come in to force on 6 April 2016, when all companies subject to the Regulations will have to start maintaining a Register or producing a statement setting out that there is no one within the company that fulfils the requirements to be placed on the Register.

This article will focus on the practical steps a company will need to consider in order to comply with the Regulations.

Identifying a PSC

  • A PSC is an individual who:
    • Holds, directly or indirectly, more than 25% of the shares or voting rights in the company;
    • Holds, directly or indirectly, the right to appoint or remove a majority of the board of directors of the company; or
    • Otherwise has the right to exercise, or actually exercises, significant influence or control over the company.

It has been recognised that some UK companies will have individuals who satisfy the PSC criteria indirectly, through a chain of companies. If the companies in the chain would have been PSCs had they been individuals, and if they are subject to a similar disclosure requirements as this, they will be a relevant legal entity (“RLE”). In situations such as these, the next RLE up the chain will need to be entered on the company’s register, instead of the individual.

Information to be contained on the PSC Register

The following information is what is required to be on the register and therefore needs to be obtained from the PSC or RLE.

For   PSCs

For   RLEs

Full name

Company name

Service address

Registered/principal office address

Country/state of residence

Legal form and governing law

Nationality

Applicable companies register and registration   number

Date of birth

Date on which they became registrable on the PSC   register

Usual residential address (this will remain   private)

Details of any current restrictions on   using/disclosing the PSC’s information

Date on which they became registrable on the PSC   register

  • Additionally, the register must show which of the conditions the PSC or RLE satisfies eg if the voting control conditions are satisfied, the register must show the broad extent of the interest by reference to pre-set bands such as over 25% up to 50%.
  • If a company does not have PSC or RLE’s, then a statement needs to be made stating that.

Location of the Register

  • The Register must be kept at the registered office address of the company and be available for inspection, upon request.
  • From June 2016, there is an obligation to file the PSC information at Companies House. This will be done when completing the annual confirmation process, which is replacing the current annual return process.

Legal Obligations and Sanctions

The Regulations place certain obligations on the company, as well as on those who are a PSC or RLEs.

  • It is for the company to take reasonable steps to identify a PSC or RLE of the company.
  • Once the PSCs or RLEs have been identified, a formal notice must be sent to such, requesting the information listed in the above table.
  • Additionally, companies are obliged to update their Register whenever there is any change of information.

Whilst there are obligations on the company under the new Regulations, there are also obligations on PSC and RLE’s.

  • Those who know, or ought to know, that they are a PSC or RLE and are not on the Register of a company, must notify the company and provide the relevant information so that they can be listed on the Register.
  • PSC’s and RLE’s are also obliged to update a company if there is any change to their information.

Criminal sanctions, including imprisonment and/or a fine, are in place for companies and their officers if they fail to comply with the above obligations.

If a PSC or a RLE fails to comply with its obligations, the relevant company can serve a warning notice that it intends to issue that person or legal entity with a restriction notice in relation to their relevant interest, effectively freezing their interest in the company until the information required for the Register is received.

What must companies be thinking of now?

  • From 6 April 2016, all companies subject to the PSC regime must have a Register recording information of all those PSC or RLEs of the company.
  • Companies therefore need to begin establishing who these PSC or RLEs are and begin to collect the relevant information required.
  • It is important to notify those PSC or RLEs of the sanctions which can be applied if they fail to respond to the notice to provide information.
  • Companies must also be aware that from June 2016 there is an additional obligation to file PSC information at Companies House when filing their annual confirmation.

This article was written by Jessica Nugent, Partner, Corporate department with assistance from Caroline Mathews, trainee solicitor.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice.  If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.