New obligation on companies to maintain register of Persons with Significant Control

As reported in our Autumn 2015 Commercial Brief, the (“the Act”) received Royal Assent on 26 March 2015.

One of the aims of the Act is to enhance the transparency of UK private companies and from 6^th April 2016 most companies have to start maintaining a register of people with significant control (“PSC register”), although the obligation to file this information at Companies House will not come into effect until three months later. The PSC Register will need to include details of individuals with significant control over the company who are “registrable”, along with the details of any relevant registrable legal entities.

An individual or relevant legal entity is non-registrable if they do not hold any interest in the company unless they hold significant influence or control over other legal entities which are registrable persons in respect of the company.

The PSC register must be available for inspection at the company’s registered office, however, private companies can choose to only maintain their PSC register on the public register at Companies House if they wish.

A person with significant control (“PSC”) over a company is a person who falls into one or more of the following categories:

• 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. The exact meaning of “significant influence or control” would have to be determined by the courts, but guidance as to its interpretation has been provided by BIS;
• The individual has the right to exercise or actually exercises, significant influence or control over any trust or firm (which is not a legal entity) which has significant control (under one of the four categories above) over the company.

The PSC register must be maintained and the information on it must be confirmed to Companies House at least every 12 months by way of a Confirmation Statement which will replace the Annual Return from June 2016. Every company is under an obligation to carry out reasonable enquiries to find out if anyone is a registrable person or registrable legal entity, and if they are, to ensure they are identified on the PSC register. Where a person is held to be a PSC, and they are also a registered director or shareholder of the company, they will still need to be identified on the PSC register, even though they will be shown on the register of directors or shareholders.  Failure to investigate the registrable persons and registrable relevant legal entities of a company is an offence punishable by a fine or imprisonment. Companies should consider whether they have individuals or relevant legal entities with significant influence or control, and should start developing internal procedures for identifying such persons. Companies House has not, however, yet provided the necessary forms to be used to file the PSC register.

Private companies will have the option of keeping this information on the public register at Companies House, rather than having a separately maintained the PSC register. A company can elect to keep the information on the public register at any time, and there is a specific procedure that should be followed, which includes notifying all registrable persons and registrable legal entities at least 14 days prior to the election that the company is electing to keep the PSC register at Companies House.

The requirement to maintain a PSC register applies to all private companies (and LLPs under separate regulations) as even if there is no PSC the register must say so, and companies should ensure that their company secretary or whoever else deals with such matters is aware of these changes and dealing with them.

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.