UPDATE: From 26 June 2017 unlisted UK companies and LLPs must keep their “Register of People with Significant Control” continuously updated on the Companies House website. Previously it was only necessary to update Companies House once a year.
If your use for the Register is for undertaking AML checks, it is still necessary to get corporate clients to confirm the register is up to date as well as confirmation from the people named in the register that they agree it is accurate. Regulation 28(9) states that you “do not satisfy your requirements” to check beneficial owners by just relying on a PSC register.
From 6th April 2016, most UK companies and LLP’s are required to prepare their PSC Register which must be available for inspection from 30th June 2016. Failure to do so could lead to criminal proceedings or the inability for the company or LLP to continue its business.
The PSC Register is a new register of people with significant control: “Persons with Significant Control” (“PSC”) which lists in a publicly accessible form those individuals who are its ultimate beneficial owners and controllers.
The PSC Register has been introduced by Government in the Small Business Enterprise and Employment Act 2015, which is aimed at combating tax evasion, money laundering and terrorist financing by creating an easy reference point for the legal and beneficial ownership of businesses to be established.
The new rules apply to all UK companies, except those subject to disclosure requirements arising from listing on the London Stock Exchange and also AIM companies. In addition, companies with voting shares admitted to trading on a regulated market in an EEA state (other than the UK) or on certain specified markets in Switzerland, the United States, Japan and Israel are also exempt as they already have to make details of their major shareholdings public.
The entities to which the new requirements apply are required to maintain a PSC Register from 6th April 2016 and, from 30th June 2016, will be required to include the information in their Confirmation Statement (which replaces the Annual Return from this date) at Companies House.
The definition of an individual with significant control meets at least one of the following five conditions:
- directly or indirectly hold more than 25% of the nominal share capital; or
- directly or indirectly control more than 25% of the votes at general meetings; or
- directly or indirectly be able to control the appointment or removal of a majority of the board; or
- actually exercise, or have the right to exercise, significant influence or control over the company; or
- actually exercise or have the right to exercise significant influence or control over any trust or firm (which is not a legal entity) which has significant control (under one of the four conditions above over the company.
The statutory guidance does set out a series of non-exhaustive principles and examples of the types of relationships and roles which a person may have with the company (or LLP) and which may consequently lead to the conclusion that such a person has the requisite control or influence as well as highlighting the types of roles and relationships that would not ordinarily lead to the conclusion that an individual exercises significant influence over a company:
- a person providing advice or direction in a professional capacity, for example, a lawyer or accountant;
- a person who is an employee acting in the course of their employment;
- a person who makes recommendations to shareholders on a one-off issue, for example, under a consultancy agreement
- a person engaged with the company in a third party commercial agreement, such as a supplier or lender;
- a person exercising a function under the statute, such as the liquidator
The company’s PSC Register may therefore record the name of individuals with significant control over a company as well as the names of legal entities with control. The information recorded should include the personal information of individuals such as their name, address, nationality, date of birth and residential address. The Act contains safeguards on how the personal information may be used and disclosed particularly on behalf of those who may be at serious risk of violence or intimidation.
In addition, details of the nature of control exercised should also be set out; for example:
- greater than 25% less than or equal to 50%
- greater than 50% but less than 75%
- greater than or equal to 75%
The company’s PSC Register will need to be kept at its Registered Office and be available for public inspection in the same way as for the Register of Members. The information on the PSC Register must be confirmed to Companies House at least every 12 months and will be held on a publicly searchable database. In addition, from June 2016 companies can elect to keep their PSC Register at Companies House.
A company or LLP complying with these regulations is obliged to provide free access to its PSC Register and copies of it to any person on request for a flat fee of £12 per copy.
These rules do not apply to foreign entities operating in the UK. Such entities are likely however to be caught by the Fourth Money Laundering Directive that will provide similar requirements across other European jurisdictions at least.
What to do now?
For our company and LLP clients not listed on the LSE or AIM, you must take action now to identify individuals or relevant legal entities that should be entered onto your PSC Register.
Your PSC Register must be available at your Registered Office and available for inspection from June 2016. It should also be filed at Companies House and updated on an annual basis, until such time that the law changes to require the information to be filed at any time when there is a change to the Register itself.
Consequences for failing to act now:
If a company’s officers do not take reasonable steps to complete their PSC Register, they may be guilty of an offence punishable by up to two years imprisonment, an unlimited fine or both and an offence is also committed by the company too.
If served with a notice regarding whether you are a person who may be registerable on a company’s PSC Register, you must comply with the notice within a month or again an offence is committed after which sanctions can be imposed on the person failing to provide the information which can include removing the individual’s voting rights and/or preventing any dividends being paid to them.
For more information and assistance regarding PSC Registers and preparing your own please contact my litigation team on firstname.lastname@example.org or telephone 01604 828282. The team are based at our Northampton office are experts at advising on this type of matter and can also offer advice and support with your wider AML compliance.