Posted by Gary Mackley-Smith on April 6, 2016
UK companies and Limited Liability Partnerships (LLPs) are going to have to be more open about who owns and controls them.
From 6 April 2016 UK companies and LLPs are required to hold a register of People with Significant Control (a PSC register). The register must then be made available for public inspection. From 30 June 2016, the information in the register has to be sent to Companies House as part of a revamped annual return filing.
For companies, a ‘person with significant control’ (PSC) is a person that meets one or more of the following conditions for a single company:
Sometimes a legal entity rather than a person may fulfil one or more of the conditions above. Not all relevant legal entities will have to be recorded on the register.
Example - company A is fully owned by B and B is fully owned by C. B and C are both relevant legal entities (they both keep a PSC register) who own more than 25% of the share capital of A (B directly and C indirectly). To avoid the duplication of information on the register, company A would include only the first relevant legal entity (entity B) in its PSC register, and should not include entity C.
Detailed regulations have now been published for companies.
For LLPs, the conditions for significant control will be based on:
Detailed regulations have now been published for LLPs.
These requirements follows last year’s Small Business, Enterprise and Employment Act (sections 81-83 & Schedule 3) which amended the Companies Act 2006 to require from 30 June 2016 onwards companies and LLPs to send information on a PSC register to Companies House with their 'confirmation statement' (which replaces the annual return), or on incorporation.
The information covered by the new confirmation statement is mostly the same as currently required for the annual return.
Companies House then has until July 2017 to make the PSC information publicly available in a central register, free of charge. Where companies and LLPs are approached directly for a copy of their PSC register (rather than requesting it from Companies House) a charge of £12 per request can be made.
Companies/LLPs will be required to take reasonable steps to identify people they know or suspect to have significant control, including by giving them notice to obtain information. PSCs will be required to disclose their interest. In some cases, details of a legal entity rather than an individual can be noted in the register.
Prime Minister David Cameron has said the PSC register will bring in “a new era of corporate transparency in Britain”. However, the register may not be as effective as hoped as provisions within the legislation would not apply to overseas companies operating in the UK through a branch. In addition, there are currently no plans for the register to be independently checked. It is reported by the FT that the Prime Minister lobbied EU members in 2013 to leave trusts outside of a central registry, recording the true ownership of shell companies.
Required particulars for a person
For an individual, the PSC register will include:
In respect of legal entities, the following information should be held:
While the information contained on the PSC register will be similar to that currently on the register of directors (in the case of companies), the residential address of a person with significant control will be protected. Other information relating to the PSC may only be withheld in certain (limited) circumstances; such as where the person may be at risk of serious harm due to the nature of the organisation’s business.
Companies/LLPs will be required to update their PSC register where they know or might reasonably be expected to know that a change has occurred. PSCs will be required to inform the company of any changes to their information.
Individuals will be able to apply to have information suppressed from disclosure in exceptional circumstances. Specified public authorities will be able to access information protected from public disclosure on request.
Where a PSC does not comply with their disclosure obligations, the company/LLP can impose sanctions which can include a loss of voting rights. In addition, where a company/LLP fails to comply under the law, criminal penalties can be imposed which will also extend to the company’s directors and (where applicable) company secretary or members of an LLP.
Companies/LLPs may need to review their management and control to assess whether they have recorded all relevant PSCs, as shareholder or LLP agreements can sometimes include terms that permit individuals to have significant control over aspects of a business. These may require review in assessing who is a PSC.
It may be the case that a right to exercise powers over a business is included in an LLP agreement, articles of association or another document, even if not actually used in practice. The rules appear to make no distinction between powers rarely used and those that are.
If you have any queries about these changes, please contact your usual Bishop Fleming advisor.
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