UK companies and LLPs will be required to keep a register of people with “significant control” over the company (the “PSC Register”) from 6 April 2016 which will be publically accessible and will need to be filed at Companies House from June 2016. These requirements stem from the Small Business, Enterprise and Employment Act 2015, as supplemented by the Register of People with Significant Control Regulations 2016 (the “Draft Regulations”). 

Background to the PSC Register

The PSC Register is the result of a UK-chaired G8 Summit in 2013, where the G8 Leaders recognised the problem of corporate opacity. The explanatory memorandum to the Draft Regulations states that corporate opacity can facilitate illicit activity and poor corporate behaviour which erodes trust and damages the business environment. The PSC Register aims to enhance corporate transparency with the objective of reducing crime and improving the business environment thereby facilitating economic growth. The requirement to maintain a PSC Register is also designed to tie in with the EU Fourth Money Laundering Directive requirement that member states hold a central register on corporate beneficial ownership.

1. What Obligations are imposed by the Draft Regulations?

UK companies and LLPs will be required to keep a PSC Register. Companies are required to take reasonable steps to find out if anyone is a person of “significant control” in relation to them, and to identify them if so.

Newly incorporated companies will be required to include a statement of initial significant control, which shall set out the information that would be required in the PSC Register and this must be updated annual via a confirmation statement.

The PSC Register should be maintained at the company’s registered office or other inspection address and be made available to the public for inspection.

2. When do Individuals have Significant Control?

An individual has “significant control” over a company (and therefore must be included on the PSC Register) where the individual satisfies any of the following conditions:

  1. direct or indirect ownership of more than 25% of the company’s shares;
  2. direct or indirect control of more than 25% of the voting rights in the company;
  3. direct or indirect right to appoint or remove a majority of the company’s board of directors;
  4. exercises, or has the right to exercise, significant influence or control over the company; or
  5. exercises, or has the right to exercise, significant influence or control over the activities of a trust or firm which itself meets one or more of the conditions above.

An individual can hold shares indirectly in a company where that individual has a majority stake in a legal entity which holds the shares in the company (or through a chain of legal entities where each holds a majority in the entity immediately below it in the chain and the final legal entity holds the shares in the company).

A majority stake is defined as:

  1. holding a majority of the voting rights;
  2. being a member and having the right to appoint or remove a majority of the board;
  3. being a member and alone controls a majority of the voting rights (pursuant to a shareholders’ agreement or the alike);
  4. exercises, or has a right to exercise, dominant influence or control.

3. When do Legal Entities have Significant Control?

A legal entity has “significant control” over a company (and therefore must be included on the PSC Register) when it:

  1. satisfies any of the conditions for significant control that apply to individuals; and
  2. is subject to its own disclosure requirements (which includes, amongst others, companies required to keep a PSC Register, comply with DTR 5 or have shares admitted to trading on certain regulated markets as set out in the Draft Regulations). 

4. What Information must be Disclosed on the PSC Register?

The details of registrable persons to be disclosed on the PSC Register are:

  1. for individuals:
    1. name;
    2. a service address;
    3. the country or state (or part of the UK) in which the individual is usually resident;
    4. nationality;
    5. date of birth;
    6. usual residential address (this information is protected from inspection);
    7. the date on which the individual became an individual with significant control; and
    8. the nature of its control (i.e. which of the five conditions (above) it satisfies); and
  2. for legal entities:
    1. name;
    2. registered or principal office;
    3. the form of the legal entity and the law by which it is governed;
    4. if applicable, the register of companies in which it is entered and its registration number in that register;
    5. the date on which it became a registrable relevant legal entity; and
    6. the nature of its control.

Should an individual or legal entity cease to become registrable, their information may only be removed from the PSC Register after 10 years.

5. When is a Company Exempt from Keeping a PSC Register?

Companies complying with Chapter 5 of the FCA’s Disclosure and Transparency Rules and companies with voting shares admitted to trading on certain regulated markets in EEA states, Japan, USA, Switzerland and Israel are not required to keep a PSC Register. The Draft Regulations include a full list of the exempt markets.

6. What are the Consequences of Non-Compliance?

Where a company does not comply an offence is committed by the company and each officer of the company who is in default. A person guilty of this offence is liable to a fine, and a subsequent daily default fine for continued contravention.