More Red Tape for Companies
Published: 27 February 2016
From 6 April 2016, UK companies, limited liability partnerships (LLPs) and Societates Europaeae (with some exceptions for listed or traded entities, etc) will be required to identify and record the people who own or control them (PSCs). In this article, we refer to "companies," but the rules for LLPs are similar.
A company will have to keep and update a PSC register at its registered office or designated single inspection location for public inspection, or it must provide a copy on request. This will be in addition to existing registers such as the registers of directors and shareholders. The PSC register must be kept even if it records that nobody has significant control of the company, because a PSC register must never be blank.
From 30 June 2016, a company will also have to file PSC information on the public register at Companies House by including it in its annual Confirmation Statement (which will replace the Annual Return). A company can choose not to have its own PSC register if it maintains and updates all the PSC information on the public register.
A Company’s officer will be required to take reasonable steps to identify the people with significant control (PSCs) over the company and check this information for accuracy. The draft statutory guidance on the meaning of significant influence and control is not, at the time of writing, finalised however, a PSC is an individual who meets one or more of the following conditions:
(i) he holds more than 25% of the shares;
(ii) he holds more than 25% of voting rights;
(iii) he has the right to appoint or remove the majority of the directors’ voting rights;
(iv) he has the right to exercise, or actually exercises, significant influence or control over the company.
(v) where a trust or unincorporated 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.
Conditions (i) to (iii) can be met directly or indirectly. For example, a condition is met indirectly where an individual holds his rights through another company. These conditions can also be met, e.g., where there are agreements to exercise rights jointly and the combined value of the shares or rights exceed 25%. Further rules apply where a company is owned or controlled by another entity, such as a parent company, instead of an individual.
Information that will be included in the register
Before a PSC can be entered on the register, the company must confirm all the details with the PSC in question. The register will have to provide details of the levels of shares and voting rights the PSC has using the following categories:
* over 25% ,
* up to (and including) 50%,
* over 50%,
* less than 75%, and
* 75% or more.
Please note where it is necessary to enter the details of a company rather than a natural person, different information is needed.
Information that will be excluded from the register
While the PSC register must include a service address and residential address for each PSC, the residential address will not be disclosed when the register is made available for inspection or copies of the register are provided to members of the public it. PCSs who may be at risk of violence or intimidation can also apply to Companies House to have their information protected.
Importantly, a company and its officers will commit a criminal offence if the PSC register is not maintained and updated properly. Further, if a PSC refuses to provide the proper information, they will commit a criminal offence. In this situation, the company can place restrictions on the shares or voting rights of the PSC withholding proper information and a breach of these restrictions can also be a criminal offence for the PSC and company. Finally, a company may question people who it believes have knowledge about its PSCs. Their failure to comply is also a criminal offence.
These offences can carry a fine and a prison sentence of up to two years so it is important to take these new regulations seriously.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.