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Go straight to gaol. Do not collect £200. Or The Register of Persons with Significant Control

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It is very likely that a significant number of UK unlisted companies and their directors, have since 6th April 2006 unwittingly been committing a number of new criminal offences for which the humans amongst them could be imprisoned.

It is quite likely that many of them will remain unaware of their criminal (in)activity until the time comes for them to file what would, last year, have been called their Annual Return, at Companies House. At that point they will be asked to file, as part of what will then be called the Confirmation Statement, the information that is held on the company’s Register of Persons with Significant Control. If they do not have a Register of Persons with Significant Control then that will be evidence that they have been committing criminal offences since 6th April 2006.

These new offences are created by a new Part 21A and new Schedules 1A and 1B to the Companies Act 2006 (“the Act”) and The Register of People with Significant Control Regulations 2016 (“the Regulations”). Between them the additions to the Act and the Regulations come to seventy seven pages of legislation.

An offence is committed (there are many offences created by the new law) if an unlisted company fails to keep a correct Register of Persons with Significant Control or PSC Register, and it is not always easy to establish who, in relation to a company, are its persons with significant control.

Some comfort can be taken if the company is using reasonable endeavours to establish who, if anyone, has significant control. In those circumstances its PSC Register must contain a statement that it has not yet determined who, if anyone, has significant control.

Similarly if the company has identified only one PSC but thinks there are more it must give the prescribed details of the single PSC in the register alongside a statement that it thinks there are more but it has not yet identified them.

Seventy pages of legislation gives lots of room to specify exactly what the company must say in its PSC register, whether about its progress in completing the register or about the persons that it finally identifies as being the ones having significant control. Failing to do it properly is, of course, an offence.

It can be simple to identify a company’s PSCs—anyone holding more than 25% of the shares, or voting rights or the right to appoint a voting majority of the directors. Most over 25% shareholders will qualify for the first two and it may be that the company need look no further.

Unfortunately significant control can be direct, as in the example above, or indirect—held through a chain of companies above the one in question. And it does not need to depend on a shareholding, it just needs to be control that is exercised or be exercisable. Companies investigating their PSCs will need to consider shareholdings, shareholder agreements, and informal arrangements. Someone could have Significant Control because of his informal influence over a group of apparently unconnected individual shareholders none o f which owns more than 5% but all of which together own over 25%.

The company must write to the persons it has identified as having significant control to get them to confirm the nature of that control and their personal details. Otherwise than in certain restricted circumstances, failure to do so is an offence. Failure of the addressee to respond properly is an offence, so remarkably is it for someone with significant control (which might not be obvious to some) where the company has not put his particulars on the register, not to inform the company of that fact.

Unless the company’s shareholdings are very straightforward professional advisers should be instructed to bring the PSC register up to date. Those who want to investigate further can find BIS guidance here: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/753027/170623_NONSTAT_GU__1_.pdf

One has to hope that the Department for Business Innovation and Skill lacks the resource or will to prosecute all these new offences or the prisons will become more than overcrowded.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.