Call to Action: Persons with Significant Control and your obligations

As of the 6th of April Companies are required to maintain a new company register known as the Register of Persons with Significant Control.

What is the change?

From the 6th of April 2016 UK Companies will be required to maintain a register that shows certain information about persons who have, or who have the potential, to exercise significant control over the running of the company. So what is a PSC?

Condition:

 

What you need to consider:
(i) An individual who holds more than 25% of shares in the company. Review your company’s register of members and identify shareholdings of over 25%.
(ii) An individual who holds more than 25% of voting rights in the company. Review your company’s register of members, articles of association, and identify people with voting rights (often attached to shares) over 25%.
(iii) An individual who holds the right to appoint or remove the majority of the board of directors of the company Look at your company’s constitution, including articles of association, and identify whether anyone has this right. If there is only one director and someone has the right to appoint them, then they would meet this condition
(iv) An individual who has the right to exercise, or actually exercises, significant influence or control over the company. You would consider this where an individual does not meet one of conditions (i) to (iii) but does exercise ‘significant influence or control’ over the company. The statutory guidance sets out principles and situations where an individual would be a PSC
(v) Where a trust or firm would satisfy one of the first four conditions if it were an individual. Any individual holding the right to exercise, or actually exercising, significant influence or control over the activities of that trust or firm. If one of the above conditions is met by a trust or firm (without legal personality), read the relevant section in the statutory guidance to identify who should be included in the PSC register

Depending on who they are and how the control can be exercised the information to be retained in respect of the PSC will vary. But generally before a PSC can be entered on the register, you must confirm all the details with them. The details you require are:

  • name;
  • date of birth;
  • nationality;
  • country, state or part of the UK where the PSC usually lives;
  • service address;
  • usual residential address (this must not be disclosed when making your register available for inspection or providing copies of the PSC register);
  • the date he or she became a PSC in relation to the company (for existing companies the 6 April 2016 should be used);
  • which conditions for being a PSC are met;
  • for conditions (i) and (ii) this must include the level of their shares and voting rights, within the following categories:
    • Over 25% up to (and including) 50%,
    • More than 50% and less than 75%,
    • 75% or more;
  • the company is only required to identify whether a PSC meets condition (iv) if they do not exercise control through one or more of conditions (i) to (iii);

When do I have to comply?

A company will be required to maintain the register from 6 April 2016 and will need to file the information on the PSC Register with Companies House by 30 June 2016.

Why is the change necessary?

It can often be the case that companies are used to undertake criminal activities. The reason for this is that the ownership within a company can be hidden. In some jurisdictions the ownership of a company is updated annually by the use of an Annual Return process. This provides the public with a update on the change of ownership within a company on an infrequent basis. Even in these situation ownership of shares can be disguised through nominee relationships and trusts. However there are many jurisdictions around the globe where ownership is completely opaque as has been seen through the news in recent weeks.

However, in an attempt to create an even more transparent process regarding ownership HM Government has implemented this process.

What will be the cost to UK Companies?

Initially the cost is likely to be the cost of review of the shareholdings and company constitution. You will need to ensure that you comply and in time, as the Failure to provide accurate information on the PSC register and failure to comply with notices requiring someone to provide information are criminal offences, and may result in a fine and or a prison sentence of up to two years.

For companies whose shareholding changes very rarely, this may be a one off or fairly irregular cost. However for larger companies the impact will be greater.

What you should do now?

It is essential that if you are a director or company secretary you seek advice on what to do next and get underway with the process as the race has already started.

If you need help please contact me Brendan O’Brien at brendan.obrien@breezeandwyles.co.uk or my colleague Donna Bromyard at donna.bromyard@breezeandwyles.co.uk or by telephone at 01992 558411.

 

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