From 6 April 2016 all companies are required to draw up and maintain a “PSC register” (Persons with Significant Influence or Control).

Why are these changes needed?

Transparency of company ownership is of great importance because “companies can be used to facilitate the conduct of illicit activities – from money laundering to tax evasion, corruption to terrorist financing. Greater transparency of company ownership and control will help us to deter and disrupt the misuse of companies, and identify and sanction those responsible when illegal activity does take place.” Department for Business Innovation and Skills Report – October 2014.

What is “significant control or influence”?

Draft guidance doesn’t explicitly define a person of significant influence or control; presumably to allow the courts a level of discretion with which to determine this test.

A company will be considered to operate significant control over a company where one or more specified conditions are met:

  1. They have a direct or indirect ownership of more than 25% of a company’s shares.
  2. They have direct or indirect control of more than 25% of the company’s voting rights.
  3. They have a direct or indirect right to appoint or remove a majority of the directors.
  4. They have rights to exercise significant influence or control over a company (see more below).
  5. They have rights to exercise significant influence or control over activities of a trust or firm which itself meets one or more of the first four conditions.

Rights to exercise significant influence or control include:

  • a non-director who regularly orders a large part of the board to vote a particular way;
  • a non-director who is regularly consulted on board decisions and their views influence the decisions ultimately made by that board;
  • someone whose recommendations are almost always followed by shareholders with the majority of voting rights.

But will not include:

  • a person advising in a professional capacity (eg lawyer or accountant);
  • a supplier, customer or lender acting under the terms of a commercial agreement;
  • an employee acting in the course of their employment.

Requirements

Companies will have to provide an initial statement about any people with significant influence or control;

  • upon incorporation; and
  • annually thereafter as part of the annual return (to be called a confirmation statement).

The PSC register must state the following in relation to each “registrable person”:

  • their name;
  • service and residential addresses
  • nationality;
  • date of birth;
  • the date they became a “registrable person”; and
  • the nature of their control.

A company is entitled to require someone they consider to be a PSC to provide the above information or state why they consider they are not registrable.

Penalties

Failing to register an individual who is later held to hold significant influence or control could result in criminal penalties for any company or individual who fails to provide information or provided false information.

How to proceed

We are still awaiting the form and content of the PSC register and will post this when available. In the meantime businesses should undertake a thorough review of individuals within their business who meet the above criteria.