From 6 April 2016, all UK companies (with a very few exceptions) and LLPs will be required to have a register of people with significant control (a PSC register). This is part of the UK Government's commitment to increase transparency about who owns and controls UK companies.
What are the new requirements in a nutshell?
Companies and LLPs will need to:
- identify the people with significant control (PSCs) over the company/LLP;
- confirm certain prescribed information about them;
- record the details of each PSC on the company's/LLP's PSC register;
- provide this information to Companies House as part of the confirmation statement (a document which is going to replace the annual return) - this requirement begins on 30 June 2016; and
- update the information on the PSC register when it changes as well as update the information at Companies House when it makes its next confirmation statement.
Even if a company or LLP has no PSCs, a PSC register will have to be prepared recording that fact (and updated if that changes).
The PSC register must be made available for inspection by the public. Companies House will keep the PSC information it receives in a central publicly accessible register.
What is a PSC?
A PSC is an individualwho meets one or more of the following conditions in relation to a company:
- directly or indirectly owning more than 25% of the shares;
- directly or indirectly holding more than 25% of the voting rights;
- directly or indirectly holding the right to appoint or remove the majority of directors;
- otherwise having the right to exercise, or actually exercising, significant influence or control.
Lastly, where there is a trust or firm (which is not a legal entity) that would satisfy any of the above four conditions if it were an individual, and there is an individual who holds the right to exercise, or actually exercises, significant influence or control over the activities of that trust or firm, that individual will be a PSC.
Slightly different tests apply to LLPs but they are based on the same principles.
In many cases, the PSC register will be easy to compile e.g. a company's PSCs may be exactly the same as its shareholders. Or it may not have any PSCs at all.
In other situations, it will be more complex e.g.
- there is a chain of ownership or the company or LLP is part of a group structure;
- shares are held by the registered shareholder on behalf of someone else;
- shares or membership interests are held by legal entities that are not individuals e.g. other companies, limited partnerships, general partnerships, or public authorities (there are specific rules that apply in all these cases).
How does this affect businesses?
All companies (with a very few exceptions, e.g. companies with an AIM or Main Market listing) are covered as well as LLPs. The new requirements therefore apply to private and public companies, companies limited by shares, companies limited by guarantee, and dormant companies.
From 6 April 2016, at a minimum, a company or LLP must be taking reasonable steps to identify its PSCs and must have a PSC register which reflects the stage it is at in so doing. Failure to comply will be a criminal offence.
Doing nothing is, therefore, not an option. Although the law does not come into force until 6 April, we know what is required and the government has published a lot of guidance to help businesses prepare the new register. This includes prescribed forms of wording which must be used in a PSC register and how the nature and level of control must be recorded.
Companies and LLPs should start considering now whether they have any PSCs and take steps to obtain the necessary information from them.
We're here to help you do that. Please contact your usual Brodies contact or the individuals below for more information.