The Small Business, Enterprise and Employment Act 2015 (SBEE) materially reformed UK company law. One of the changes and which was perhaps the most controversial was the introduction of a central public registry of those individuals with significant control of UK companies and limited liability partnerships (LLPs) (known as PSCs). The introduction of a central public registry of details was in addition to the requirement that those companies and LLPs within scope maintain their own register. This note is intended to help English companies and LLPs understand their obligations when compiling the register, the tools available to them when identifying the persons whose details must be entered on the register, where the information must be kept and who can access it. 

WHY IS IT IMPORTANT?

Broadly, SBEE amended the Companies Act 2006 (the CA 2006) to require details of those individuals who:

  • ultimately own or control more than 25 per cent of an English company’s shares or voting rights; or
  • have the right to share in more than 25 per cent of any surplus assets of an English LLP or who ultimately own or control more than 25 per cent of members’ rights to vote; or 
  • who otherwise exercise significant influence or control over the company, LLP or its management, (SIOC)

to be included on a private and a public register (the PSC register). 

Companies and LLPs are required to keep a register from 6 April 2016 (which must be open for inspection on that date) and, from 30 June 2016, PSC information must also be included in companies’ and LLPs’ annual confirmation statements (currently known as annual returns). 

From 30 June 2016 new companies and LLPs will be required to deliver a ‘statement of initial significant control’ on incorporation, alongside other registration documents.

WHO MUST KEEP A REGISTER?

The majority of English companies and LLPs need to comply with the provisions or risk being convicted of a criminal offence. Only listed companies are broadly exempt as they are already subject to similar disclosure provisions. Likewise all PSCs need to provide the required information to the company (unless it is exempt) or LLP or risk being convicted of a criminal offence. 

The offence is punishable by a fine and/or up to two years imprisonment. There is no defence available to a company or LLP, its officers/management or PSCs for an inadvertent or slight breach of the provisions.

HOW ARE PSCS IDENTIFIED?

The company or LLP’s obligations

Companies and LLPs must take reasonable steps to find out if there is anyone who is a PSC and if so, to identify them. 

When identifying PSCs, slightly different provisions apply depending upon whether the company or LLP is part of a chain of legal entities, if there are non-legal entities in a chain, or if the company or LLP is owned directly by individuals but, in any event, the company or LLP must generally give notice to anyone whom it knows or has reasonable cause to believe to be registrable. For further details on identifying PSCs, please refer to our note, ‘PSC register – identifying PSCs’.

The company or LLP must give a notice to anyone whom it knows or has reasonable cause to believe to be registrable unless the company or LLP has already been informed of the person’s status as a PSC or RLE and been given the requisite information. This means even where an entity knows that someone is a PSC or RLE it will need to be informed of that and, for a PSC, the information and particulars must be provided either by that person or with their knowledge. In addition, an individual PSC must also confirm the prescribed details, or they must be confirmed by someone with the PSC’s knowledge, before the information can be entered on the PSC register. 

A company or LLP may also give a notice to a person if it knows or has reasonable cause to believe that the person either knows the identity of someone that is registrable or, knows the identity of someone likely to have that knowledge. 

Aside from the requirement to give a notice, unless the company or LLP has already been informed of the person’s status as a PSC or RLE and been given the requisite information, non-statutory guidance suggests what other reasonable steps a company or LLP must typically take to identify its registrable persons (e.g. reviewing its constitutional documents and statements of capital). What is clear, from the drafting of the legislation and the guidance, is that giving a notice may not of itself be sufficient. What is also clear is that if a company or LLP fails to give a notice, or otherwise to take reasonable steps where applicable to investigate or obtain information required for the PSC register, the company and every officer in default, or LLP and designated member in default, will be liable, on conviction, to a fine and/or two years imprisonment. 

From 30 June 2016 new companies and LLPs will be required to deliver a ‘statement of initial significant control’ on incorporation, alongside other registration documents.

Notice content

The notice must require the addressee to state whether or not they are registrable and if so, to confirm or correct any of the particulars included in the notice and, where relevant, provide missing information. For details of the required particulars refer to ‘What must be recorded on the register?’ below.

The notice must state on its face that it should be complied with within one month of its date.

PSC/RLE obligations

An individual or RLE is also under an obligation to identify itself as a PSC or RLE. It must provide the company or LLP with the relevant details, if it knows, or ought reasonably to know that it is a PSC or RLE, it is not already on the register and it has not received a notice from the company or LLP within one month of becoming one. Failure to comply with that obligation, or recklessly or knowingly making a statement that is false in a material particular is again a criminal offence and may incur a fine and/or up to two years imprisonment. In addition, if a person fails to comply with the initial notice, the company or LLP may, having first sent a warning notice, issue them with a restrictions notice. The restrictions notice will effectively freeze the person’s interest, preventing the person from selling, transferring or receiving any benefit from their interest in the company or LLP. Regulations prescribe the proposed timing and content of these further notices, what constitutes a valid reason for not complying and the process for lifting restrictions. 

WHAT MUST BE RECORDED ON THE REGISTER?

The details that are required to be recorded on the register are as follows:

Click here to view table.

Regulations prescribe the form which some of the details must take:

  • the nature of control must be recorded in the register by stating which of the tests for being registrable have been met (although if one of the first three conditions are met there will be no requirement to consider if the fourth condition also applies) and whether the percentage of shares or voting rights held by the PSC or RLE is within one of three broad bands (more than 25 per cent up to 50 per cent; more than 50 per cent up to 75 per cent; or 75 per cent or more). There is no requirement to state the precise percentage of control; and
  • certain statements must be recorded in the register either where the company or LLP does not have a registrable person or has been unable to verify that person. The company or LLP is prohibited from entering an individual’s details on the register until they have all been confirmed (this provision does not apply to other legal entities, only individuals). Likewise the company or LLP must not enter details of any changes to an individual’s entry on the register until they have also been confirmed. Certain presumptions of confirmation exist. A ‘pick list’ of options, for recording on the register, addresses variations such as where the company or LLP has issued a formal request for information from a person, or where it has placed restrictions on shares or rights where a person has not complied with a request for information.

The company or LLP must also keep the information recorded on the register current. If it knows, or has reasonable cause to believe that a relevant change has occurred, it must give a notice to the PSC/RLE as soon as reasonably practicable, unless it has already been informed of the change. The PSC/ RLE is also obliged to keep the information current and must notify the company or LLP of any changes to its status or the prescribed particulars on the register. A company or LLP failing to comply with the provisions for recording information is liable, on conviction, to a fine.

PROTECTION REGIME

Some or all of the information on the PSC register can be withheld from disclosure in certain limited circumstances:

  • residential addresses of registrable persons are not in any event available to the public (either on inspection of the company/LLP’s own register or through Companies House). Residential addresses may however also be withheld from disclosure by Companies House to credit reference agencies where, broadly, the person can demonstrate that there is a serious risk that the person, or someone who lives with them, will be subjected to violence or intimidation as a result of the activities of the company; and
  • a person may also apply to Companies House to stop any of their information from appearing on the public register or being disclosed where the person can demonstrate that the activities of the company or LLP, or one or more characteristics or personal attributes of the person when associated with the company or LLP would, if disclosed, put them, or someone who lives with them, at serious risk of violence or intimidation. 

The protection regime is modelled on the existing regime for the protection of directors’ residential addresses. Guidance from Companies House requires evidence to support a protection application. Evidential examples, suggested by Companies House, include documentary evidence of a threat or attack or a police incident number. Also in that guidance, Companies House gives examples of a company’s activities which may mean its directors fall within the protection regime, such as if the company is licensed under the Animal (Scientific Procedures) Act 1986. 

Protected information is still available to specified public authorities on application.

WHERE MUST THE REGISTER BE KEPT?

The register must be kept available for inspection alongside the company or LLP’s other registers i.e. at the registered office or at its alternative nominated inspection location. This requirement will however be subject to the option that companies and LLPs will have from June, to elect to maintain certain registers at Companies House. In addition to keeping a ‘private’ PSC register the information must also be filed with Companies House annually as part of the new annual confirmation statement. Implementation of the EU’s Fourth Money Laundering Directive in 2017 will require this annual public statement to be replaced with an obligation to keep the public register up-to-date.

WHO CAN INSPECT THE REGISTER?

The company or LLP’s own PSC register must, in any event, from 6 April 2016 be open to inspection free of charge and the company or LLP must provide copies of the register on payment of a flat fee of £12.

The provisions governing inspection of the PSC register largely reflect the procedure for accessing copies of the members’ register. The person wishing to inspect or obtain copies of the register must provide their name and address and the purpose for which the information is to be used. The company or LLP must, within five working days of receiving a request, either comply with it or apply to court. If the court is satisfied that the request is not for a proper purpose it must direct the company or LLP not to comply with it. Guidance states that in this context ‘proper purpose’ is “intended to have a wide interpretation and application. The purpose of the PSC register is to provide transparency of company ownership and control and your company’s register is intended to be accessible to that end”. Failure by the company or LLP to respond to requests as required will be an offence and the company and its officers or LLP and its designated members may be fined. 

WHAT HAPPENS NEXT?

The Government has prepared detailed guidance to help companies/LLPs and their members understand their obligations. The obligation to keep a PSC register is in addition to any obligation to disclose details of ultimate beneficial owners to professional service providers working in the regulated sector. The majority of UK companies and LLPs need to comply with the provisions or risk being convicted of a criminal offence (UK listed companies are broadly exempt). Likewise all PSCs and RLEs will need to provide the required information to the company or risk being convicted of a criminal offence. There is no defence available to a company, LLP, PSC or RLE for an inadvertent or slight breach of the provisions. Now that the regime is in force those entities within scope and their members should consider whether they have, or are, an individual who is deemed to exercise significant control.