Member News, Uncategorized

UK companies/LLPs – New requirement to publicly disclose beneficial ownership

What is this PSC register everyone’s talking about?

The register of people with significant control (the PSC register) is a register of individuals or legal entities that have significant control over UK companies and UK LLPs. It has been introduced under the Small Business, Enterprise and Employment Act 2015 with the purpose of identifying the ultimate beneficial owners and controllers and making their holdings public.  The new requirement is intended to increase corporate transparency with the aim of combatting money laundering, the financing of terrorism and tax evasion.  The new PSC register will sit alongside the usual company registers including the register of directors and the register of shareholders.

Why do I care?

The requirement for all UK incorporated companies and UK LLPs to have a PSC register and keep it up to date comes into force on 6th April 2016.  The requirement to keep a PSC register covers companies limited by shares, companies limited by guarantee (including community interest companies), societas europaea, wholly-owned subsidiaries and dormant companies.  The only exception is for UK companies whose shares are listed on certain stock exchanges (though its subsidiaries would still need to have a PSC register).

What does PSC mean and who are they?

PSCs are people who meet one of the specified conditions for companies or LLPs.

For companies the specified conditions to be a PSC are that a person (i) holds directly or indirectly more than 25% of the company shares; (ii) holds directly or indirectly more than 25% of the voting rights; (iii) has the right to appoint or remove the majority of directors; or (iv) has the right to exercise, or actually exercises, significant influence or control over the company.  The final condition is holding the right to exercise, or actually exercising, significant influence or control over the activities of a trust or firm which is not a legal entity but would itself satisfy any of the first four conditions. There are equivalent provisions for LLPs.

A company or LLP may have multiple people with significant control over it or it may have none.

What does “significant influence or control” in the conditions mean?

As you might imagine it’s complicated but luckily there’s guidance on the meaning for both companies and LLPs.  It does not provide an exhaustive list but rather a number of principles and examples which would be indicative of holding the right to, or actually exercising, significant influence or control.   It also gives a non-exhaustive list of the types of roles and relationships which a person might have with a company or LLP which would not, on their own, result in that person being considered to have significant influence or control.  This includes people such as directors, lawyers and accountants.

So it’s just people that go on the register?

Unfortunately not.  If a company or LLP is owned or controlled by a legal entity then that legal entity must be put on the PSC register if it is both relevant and registrable in relation to a company or LLP.

Relevant?  Registrable?  What does that mean?

A legal entity is a body corporate or a firm and is relevant (a “RLE”) in relation to a company or LLP if it meets one or more of the relevant conditions in relation to PSCs (see above) and is subject to its own disclosure requirements i.e.:

• it holds its own PSC register; or
• it is one of the excepted UK companies listed on certain stock exchanges.

A legal entity is registrable in relation to a company or LLP if it is the first relevant legal entity in a company’s ownership chain.

What do I have to write on the register?

A PSC register can never be blank.  Prescribed information on PSCs and registrable RLEs needs to be included in the PSC register, or a description of the status of investigations into the identity of the PSCs or RLEs in the prescribed form needs to be stated.

What if I don’t know who my PSCs or registrable RLEs are?

Companies and LLPs are under a duty to take reasonable steps to find out who their PSCs and registrable RLEs are and should contact them or others who might know who they are to confirm they meet one or more of the conditions and that the prescribed information required for the PSC register is correct.

What if I think I should be on another organisation’s PSC register?

There will also be a duty on individuals or legal entities who think they should be on a PSC register to tell the company or LLP and provide it with the necessary information.

What if I don’t want to?

There are a number of obligations under the new regime for companies, LLPs and PSCs a breach of which is a criminal offence.  Sentences range from a fine to up to two years imprisonment.  For individuals or legal entities who fail to comply with a company’s enquiries they may have their shares disenfranchised or restrictions placed on them.

Will the register be public?

Each register will be open to public inspection and from 30 June 2016 the information will have to be filed at Companies House and will be freely available online. The information will need to be confirmed to Companies House every 12 months.  The residential addresses and day (but not the month or year) of the date of birth of individuals will be suppressed.  Applications can be made to keep PSC information private but only if there is a risk of people being put at risk of serious violence or intimidation in the event that the information is public.

This sounds like there is a lot of work involved.

For some companies completing the PSC register will be pretty straightforward but for others it will be both complex and onerous.

What can I do?

If you would like help with any aspects of the new PSC register obligations please contact your usual Stephenson Harwood contact.

© 2016 Courtesy of Stephenson Harwood LLP – a member of the EACCNY