INTRODUCTION

On 6 April 2016, a new regime for registering PSCs came into force in the UK. This article sets out a case study illustrating how the regime applies to quoted companies and their subsidiaries.

EXEMPTION

Quoted companies whose shares are publicly traded on certain specified markets are exempted from the PSC regime because other transparency regimes apply to them. Exempted companies include publicly traded companies which are subject to Chapter 5 of the Financial Conduct Authority’s Disclosure and Transparency Rules (DTRs), such as UK plc’s quoted on AIM, those with voting shares admitted to trading on a regulated market in the UK or other member of the European Economic Area, and those with voting shares admitted to trading on specified markets in Switzerland, the USA, Japan and Israel. A list of specified markets is available in Schedule 1 of the Register of People with Significant Control Regulations 2016 (the Exemption). i

The Exemption only applies to the company with publicly traded securities (UK plc in this case study). Therefore, analysis of the application of the PSC regime has to be carried out on the other members of the group.

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COMPANIES IN UK PLC’S CORPORATE GROUP

UK plc is a publicly traded company and the parent company of a group structure comprised of a number of intermediate holding companies (Holdco) and operating companies (Opco) incorporated in different jurisdictions.ii

Analysis

Holdco UK, Opco UK1 and Opco UK2 are private companies limited by shares incorporated in England and Wales. They are required to maintain a PSC register to identify persons who have significant control over them. UK plc is not required to maintain a PSC register as the Exemption applies.

Opco UK1

Holdco Jersey owns 100% of the shares in Opco UK1. However, Opco UK 1 cannot put Holdco Jersey’s details on its PSC register because Holdco Jersey is an overseas company which does not meet the conditions for being a registrable relevant legal entity (registrable RLE).iii

Accordingly, Opco UK1 must take reasonable steps to determine the ownership and control of Holdco Jersey.

Upon doing so, it ascertains that Holdco UK owns 100% of the shares in Holdco Jersey and that Holdco UK meets the conditions for being a registrable RLE.

Conclusion: Holdco UK is a registrable RLE of Opco UK1 and its details must be entered on the PSC register of Opco UK1.

Opco UK 2

Holdco Isle of Man owns 100% of the shares in Opco UK2. However, Opco UK2 cannot put Holdco Isle of Man’s details on its PSC register because Holdco Isle of Man is an overseas company which does not meet the conditions for being a registrable RLE. Opco UK2 must take reasonable steps to determine the ownership and control of Holdco Isle of Man.

Upon doing so, it ascertains that Holdco UK owns 70% of the shares in Holdco Isle of Man, and that Holdco UK meets the conditions for being a registrable RLE.

In addition, it ascertains that P owns 30% of the shares in Holdco Isle of Man. P has an interest in Opco UK2 held indirectly through Holdco Isle of Man, which does not qualify to be a registrable RLE. P is only a PSC of Opco UK2 if he has a “majority stake” in Holdco Isle of Man. P will hold a majority stake if:

  • P holds a majority of voting rights in Holdco Isle of Man;
  • P is a member of Holdco Isle of Man and has the right to appoint or remove a majority of the board of directors;
  • P is a member of Holdco Isle of Man and controls a majority of the voting rights by agreement with other shareholders or members; or
  • P has the right to exercise or actually exercise dominant influence or control over Holdco Isle of Man.

Opco UK 2 needs to take reasonable steps to determine if P has a majority stake as a result of the second, third or fourth bullet point – it is apparent that the first bullet does not apply. Those bullet points might apply by dint of rights in any shareholders’ agreement between P and Holdco UK, and there is statutory guidance on the meaning of significant influence or control for the purposes of the fourth bullet, which can be found here: https://www.gov.uk/government/publications/guidance-to-the-people-with-significant-control-requirements-for-companies-and-limited-liability-partnerships

Conclusion: Holdco UK is a registrable RLE of Opco UK2 and its details must be entered on the PSC register of Opco UK2. If P has control of Holdco Isle of Man through a “majority stake”, he is a PSC of Opco UK2 and his details must be entered on the PSC register of Opco UK2. If P does not have such control, he is not a PSC of Opco UK2.

Holdco UK

Holdco BVI owns 100% of the shares in Holdco UK. However, Holdco UK cannot put Holdco BVI’s details on its PSC register because Holdco BVI is an overseas company which does not meet the conditions for being a registrable RLE. Holdco UK must take reasonable steps to determine the ownership and control of Holdco BVI.

Upon doing so, it ascertains that UK plc owns 100% of the shares in Holdco BVI and that UK plc meets the conditions for being a registrable RLE.

Conclusion: UK plc is a registrable RLE of Holdco UK and its details must be entered on the PSC register of Holdco UK.

SHAREHOLDERS OF UK PLC

UK plc is a publicly traded company with a significant shareholder holding 26% of its shares, with the balance held by a number of small shareholders.

Conclusion: UK plc is not required to maintain a PSC register as the Exemption applies. The fact that a shareholder owns more than 25% of the shares and or voting rights does not change this.