The Persons with Significant Control (PSC) regime was introduced in April 2016 by the UK government. Its aim is to increase transparency about who ultimately owns and controls UK companies. It also provides information to potential investors thinking about investing in a company and assists law enforcement agencies with money laundering investigations. The regime is therefore an important aspect of corporate law and is governed by Part 21A of the Companies Act 2006 (the "PSC Regulations"). With that in mind, we have looked at some of the key points for you and your business to note.
Which entities are required to maintain a PSC register?
The regime applies to UK companies (other than those admitted to trading on a regulated UK/EEA market or other markets specified in the PSC Regulations), limited liability partnerships, Societates Europaeae and eligible Scottish partnerships (namely Scottish limited partnerships and Scottish qualifying general partnerships). As such, not all entities are required to maintain a PSC register. Note that, in this post, we are focusing on the regime as far as UK companies limited by shares are concerned.
What steps do companies need to take?
Under the PSC regime, UK companies are required firstly to identify any PSCs. In this respect, they will need to consider the conditions discussed below. The company will then need to prepare and maintain a PSC register. Moreover, the company will be required to provide information about its PSC position to Companies House (where it will be publicly available). The company will also need to update the information held at Companies House, and on its own PSC register, should there be any changes.
Which individuals or entities should be entered on a PSC register?
Those individuals satisfying one or more of the conditions discussed below should be entered on the company's PSC register. Furthermore, any Relevant Legal Entities (RLE) should be entered on the register.
In brief, an RLE is an entity which would satisfy the PSC conditions if it were an individual and which is subject to its own disclosure requirements (such as keeping a PSC register). As such, a UK company could be an RLE in relation to the company (along with overseas companies who are listed in the UK or on certain overseas markets).
In relation to a group structure scenario, where various companies in the ownership chain are RLEs, any RLEs further up the chain will not be registrable in relation to the company – only the RLE directly above a company in the ownership chain will be registrable.
Further UK Government guidance can be found here.
How would a company identify a PSC?
As far as companies are concerned, a PSC is an individual who meets one or more of the following conditions:
- the individual holds, directly or indirectly, more than 25% of the shares in the company;
- the individual holds, directly or indirectly, more than 25% of the voting rights in the company;
- the individual holds the right, directly or indirectly, to appoint or remove a majority of the board of directors of the company;
- the individual has the right to exercise, or actually exercises, significant influence or control over the company; or;
- the individual actually exercises, or has the right to exercise, significant influence or control over the activities of a trust or firm that is not a legal entity which would itself meet one or more of Conditions (i) – (iv) (or would do so if it were an individual).
When considering whether an individual satisfies any of the above conditions, the company should look to its register of members, articles of association and constitution, together with all other information available to it. Interests held by individuals, legal entities and trusts or partnerships without legal personality should be considered (along with any joint rights/arrangements which are controlled by the same person).
If more than one condition is satisfied by the same individual (or indeed RLE), information about each satisfied condition should be recorded in the PSC register. Note that is not necessary, however, to consider whether the fourth condition is met if any of the first three conditions are satisfied.
Our colleague, Fiona Beal, has considered that fourth condition and when it might be satisfied in a previous post.
Where should a company record its PSC information?
A company should maintain two PSC registers. It should maintain its own register and the central register at Companies House.
When should a company record and provide the PSC information?
A company should record the details of the PSC on its own PSC register within 14 days of becoming aware of the PSC information in question (or, indeed, any subsequent changes). The information should then be provided to Companies House within a further 14 days.
Specifically, the company should provide information such as the PSC's address, date of birth and the date on which he or she became a PSC in relation to the company. The company should also specify which of the PSC conditions have been met by the PSC in question.
Where there are no registrable PSCs or RLEs, this should be stated on the PSC register and at Companies House. Note that information about a PSC (but not an RLE) needs to be confirmed by the company in accordance with the PSC Regulations, before it is put on the PSC register.
In this respect, information can be treated as confirmed if: (i) the PSC supplied the company with the information; (ii) the information was provided to the company with the PSC's knowledge; (iii) the company has asked the PSC to confirm the information was correct, and they replied that it was so; or (iv) the company holds previously confirmed information (and has no reason to believe it has changed).
The same timescales would usually apply when updating your company's PSC information held at Companies House. However, due to the coronavirus pandemic, recent legislation has extended the deadline to notify Companies House of any PSC register updates to 42 days. This temporary provision will last until April 2021.
What is the penalty for failing to meet the requirements?
Failure to comply with your obligations under the PSC regime constitutes a criminal offence. Indeed, such failure could result in a fine or a prison sentence of up to two years or both for a company officer. It is therefore essential that you and your business are fully aware of, and up to speed with, your responsibilities under the PSC regime.
How can Brodies help?
The Brodies corporate team is experienced in advising on all aspects of the PSC regime. For further information and advice, please get in touch with your usual Brodies contact.