New PSC law

On the 6th April 2016, new guidance came into effect for companies and limited liability partnerships (LLPs) for registering people with what is termed ‘significant control’. The PSC register requires companies and LLPs to hold a register of those people who have a say over how they operate. This includes any individual that holds 25% or more of the shares in a company, 25% of the votes, or any other right to exert influence on the business. This effect can be either through direct or indirect means.

The change in law means that organisations have to register those with such interests and failure to do so could result in criminal convictions and possible fines. The legislation guidance issued outlines what individuals and legal entities need to do to comply with the legislation and what it means.

For instance, details of the PSCs will need to be registered with Companies House on the new Annual Confirmation Statement and the information can be accessed by the public free of charge. The company will also be required to allow those with a legitimate interest to inspect the PSC register at their office, for a small fee.

Why Has the PSC Register Been Introduced?

It’s hoped that the introduction of a PSC register in conjunction with the Small Business Enterprise and Employment Act 2015 will create greater transparency, helping to combat problem areas such as terrorism, money laundering and tax evasion by showing who actually owns or has control over a particular organisation. It follows on from an EU ruling in 2015 under the Fourth Money Laundering Directive that member states need to implement before 2017.

Who Needs to Register?

If you are an individual who meets any of the following requirements, then you will need to be entered on the PSC Register:

  1. You have 25% of the shares of the company, held either directly or indirectly.
  2. You have 25% of the voting rights of the company, either directly or indirectly.
  3. You have the right to remove and appoint most of the directors in the company, either directly or indirectly.
  4. You have the right to exercise influence or control over the company.
  5. You have the right to exercise influence or control over the company via a trust or firm or other entity in a way which would satisfy the four terms above.

Not all companies will have individuals that meet the requirements for going on the PSC register, though you may wish to seek the appropriate clarification as to what your status is. One area where confusion might arise is that the PSC is perceived to be intended for individuals to register rather than legal entities such as a particular company or LLP. However, if a legal entity is itself required to maintain a PSC register then it must be entered into the PSC register of the company in which it exerts significant control.

Who Doesn’t It Apply To?

The PSC register doesn’t apply to those companies that are subject to DTR 5 requirements and those that have voting shares which are admitted to share trading on an EEA regulated market (other than the UK) or other specified markets. The reason for this is that these companies already have to make disclosures and the register would be seen as a duplication.

When Do You Need to Register By?

Companies are required to begin keeping a PSC register from April 2016 and that information needs to be filed with Companies House by the end of June 2016.

What Happens Next?

If you are an individual or legal entity that needs to go onto a PSC register, then you can contact the company directly and offer your details. If you have not done so, then the company will contact you to ask for the details. Failure to provide these without a valid reason could mean you are guilty of a criminal offence and lead to prosecution. If the company has failed to contact you and you know that you are a person with significant control you must supply your details to the company. Again, failure to do so can lead to a criminal conviction.

The company will need to register which of the five requirements a particular PSC meets. For instance, if they have more than 25% of the voting rights then the company will need to note the extent of the holding. Details that are recorded will depend on whether it is an individual or a registerable legal entity. The exact nature of what should be included and excluded in the register is routinely under review and may well include more in the future. Normal information that will be included are name and address, date of birth and nationality and whether there are any restrictions on disclosing your PSC information.

Timelines for Responding

A company must actively seek out PSCs and ask for their information. If someone has not volunteered their information, the company must send a notification within 1 month of finding out that they are a PSC. The person receiving the notification then has 1 month further in which to reply.

If you do not reply in a timely manner, then the company can issue a warning and put restrictions in place, including your ability to sell shares and stipulate that no rights in respect of your interest can be exercised.

Keeping Information Up-to-Date

The onus is on the PSC to inform the company that there has been a change in their status whether that is the possession of more shares or their no longer meeting the PSC requirements, necessitating removal from the register.

Where is the PSC Register Kept?

The company must keep its own register accessible and anyone with a proper purpose can access it for a small fee of £12.

The information must also be filed with Companies House and this will be available on the central public register. This will also be made available to law enforcement agencies. A private company can also choose to keep its own register at Companies House but must inform all PSCs that it is doing so.

Finding PSC Information

The Government has produced a good deal of guidance for companies to enable them to register PSCs and you can view this on their website. All companies with PSCs need to make sure that they have registered interests and logged their information with Companies House by 30th June 2016.

Written by Anna Lemos