PSC registers: Advice to UK companies

February 25, 2016

 

From this April most UK companies, limited liability partnerships (LLPs) and societas Europaea (SEs), will be required to maintain a new statutory register of people with significant control over it – a PSC register.

These new requirements for companies to hold a PSC register will make it clear who owns and controls UK companies and will therefore benefit potential investors and law enforcement agencies.

This article explains what UK companies need to do to comply with the new regulations.

Identifying People with Significant Control

A person with significant control (PSC) can be an individual or legal entity. To be considered a PSC, an individual or legal entity must:

  1. Directly or indirectly hold more than 25% of the company’s shares.
  2. Directly or indirectly hold more than 25% of the company’s voting rights.
  3. Directly or indirectly hold the right to appoint or remove a majority of the board of directors.
  4. Exercise or have the right to exercise significant influence or control over the company.
  5. Exercise or have the right to exercise significant influence or control over the activities of a trust or firm which itself meets one or more of the first four conditions in relation to a company.

A company’s PSC register must include details of all individuals and relevant legal entities (RLEs) that qualify as registrable PSCs.

An RLE is a legal entity that satisfies one of the five conditions set out above and is subject to its own disclosure requirements (i.e. it must maintain its own PSC register or be subject to disclosure requirements as a result of being listed on a regulated market in an EEA state or on certain markets in Japan, Switzerland, Israel and the US).

A PSC is registrable under all circumstances except when the PSC only holds an interest in the company through one or more RLEs over each of which it has significant control.  The following scenarios demonstrate when individuals and companies are registrable and must be included on a PSC register:

Company A, registered in the UK, is owned by individuals A (20%) and B (80%).  Individual B is a registrable PSC in relation to Company A and must appear on Company A’s PSC register.  Individual A is not a PSC and will not appear on the register

Example 1 of PSC Eligibility

Company B, registered in the UK, owns 100% of Company A, which is also registered in the UK.  Company B is owned by individuals A (20%) and B (80%).
Individual B is a registrable PSC in relation to Company B and must appear on Company B’s PSC register.  Individual A is not a PSC in relation to Company B and will not appear on the PSC register.  Company B is a registrable RLE in relation to Company A and must appear on Company A’s PSC register.  Individual B is a PSC in relation to Company A, but, since B only holds an interest in Company A through an RLE (Company B), B is not a registrable PSC in relation to Company A and will not appear on Company A’s PSC register.

Example 2 PSC Eligibility

What are companies required to do?

  1. Identify individuals and legal entities with significant control over the company and confirm their information. A company must give notice to any individual or RLE it knows, or believes, is a registrable PSC.  The notice must require the addressee to state whether he or the RLE is a registrable PSC in relation to the company and, if so, to confirm, correct or provide the required particulars. A company should also give notice to an RLE or any legal entity that satisfies at least one of the five conditions but is not subject to its own disclosure requirements, if it believes that entity knows the identity of registrable PSCs.
  2. Record the details of the PSC and RLEs on your company’s register. The PSC register must include any registrable PSC’s name, address, nationality, date of birth and residential address, as well as the nature of his or her control over the company.  It must include similar details for any registrable RLE.
  3. Provide this information to Companies House as part of your Confirmation Statement (formerly the Annual Return).The PSC register will then be publicly accessible.
  4. Update the information on your company’s register when it changes, and update the information at Companies House when you make your next Confirmation Statement. A company is obligated to keep the information on its PSC register up-to-date and is not able to enter a registrable individual’s details in the PSC register until those details have been confirmed.  A company must also note on the register if it has established that there are no PSCs or if it believes there are PSCs, but has been unable to identify them and confirm their particulars.  A company must enter an RLE’s particulars as soon as it becomes aware of its status as a registrable RLE.

Failure to comply

Failure of a company to comply with its obligations to obtain information and keep it up-to-date will be an offence by the company and every officer of the company who is in default.  Such an offence will be, upon conviction, liable to imprisonment, a fine, or both.

What to do prior to 6th April

In preparation for this new requirement, you should:

  • Consider whether there are any PSCs in relation to your company.
  • Send notices to PSCs (both individuals and RLEs) informing them of this new statutory requirement and requesting confirmation of PSC status and required details.
  • Create a draft PSC register to update as and when information is received.

Key dates

06 April 2016    Requirement to keep a PSC register takes effect.

30 June 2016    Requirement to file PSC information with Companies House upon incorporation
annually with a company’s confirmation statement.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice.

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