A New UK Requirement
Most UK-incorporated private companies now are required to keep a public register of people with significant control (a "PSC") over the company, known as the PSC Register. A director of a company registered in Ireland may receive demands for information from affected UK companies to enable the UK companies to prepare their PSC Registers. In any event, the new UK requirements are a foretaste of the requirements that are likely to be introduced in Ireland, as part of a wider EU anti-money laundering initiative under the Fourth Anti-Money Laundering Directive.
Similar Irish Legislation
Under the Fourth Anti-Money Laundering Directive Ireland must (by 26 June 2017) introduce a register which details company beneficial ownership information.
The European Commission is suggesting that the Directive should be implemented earlier than planned currently and timescales as short as late 2016 have been mentioned. Early in 2016 the Department of Finance and the Department of Justice and Equality held a consultation process in relation to introducing such a register in Ireland.
Details of responses received to this consultation have not yet been published but it is expected that more information will become available soon regarding the nature and scope of the anticipated Irish register, equivalent to the PSC Register in the UK.
UK Requirements: Scope
The Small Business, Enterprise and Employment Act 2015 introduced a requirement for most UK-incorporated private companies and certain other types of entity (the "Company") to maintain a PSC Register, subject to exemptions1.
The purpose of the PSC Register is to ensure that the persons who ultimately have significant control over a Company are readily identifiable. It replaces the situation where UK company share registers disclosed only the names of legal owners of shares, as is currently the situation in Ireland.
Who is a PSC for this Purpose?
The PSC Register must record details of individuals or legal entities that have "significant control" over the Company.
An individual is deemed to be a PSC if he or she:
- holds (directly or indirectly) more than 25% of the shares in the Company;
- holds (directly or indirectly) more than 25% of the voting rights in the Company;
- has the right to exercise, or actually exercises, significant influence or control over the Company; or
- has the right to exercise, or actually exercises, significant influence over a trust or firm that is not a legal person (eg a partnership) that would satisfy one of the conditions above if it were an individual.
The Registration Obligation
A Company that is owned or controlled by a legal entity (such as another company) must include details of that entity on the PSC Register if, in relation to the Company, it is both (a) relevant and (b) registrable.
- A legal entity is “relevant” if it: (a) would have been classed as a PSC, had it been an individual; and (b) has to maintain its own PSC register or is subject to the Financial Conduct Authority’s disclosure and transparency rules or has voting shares admitted to trading on a regulated market in the UK or the EEA.
- In relation to a Company, a relevant legal entity is “registrable” if it is the first relevant legal entity in the Company’s ownership chain.
If a legal entity is not both relevant and registrable, the Company should not enter it in its PSC Register and the Company must enquire further up the ‘chain of ownership’ to identify any relevant and registrable PSC.
What Amounts to Influence or Control?
The fact that a person can direct a Company’s actions or activities, or a person can ensure that a Company generally undertakes the activities which that person desires, is usually indicative of control or significant influence.
Obligation to Identify PSCs
Every Company must take reasonable steps to find out and identify if anyone is a relevant and registrable person or a relevant and registrable company.
If a Company has not received information from a person that it considers to be a PSC, it must send that person a notice asking whether he or she is a PSC and that the person provides or confirms the information required for the PSC Register.
This has potential implications for persons resident in Ireland. It is a criminal offence under UK law to fail to respond to such a notice without a valid reason. In such circumstances, a PSC also faces the risk of losing his or her rights in the Company: a person who fails to reply to a notice can have his or her share rights restricted (including the right to vote, receive dividends or transfer shares).
In UK law, a person who becomes aware that he or she is a PSC of a Company and who has not been contacted by the Company, must contact the Company within one month from the time he or she knows or ought to know of this situation. Failure to do so is also a criminal offence under UK law.
Although the information contained in the PSC Register is available to the public, this is subject to limitations in order to protect against the possibility of identity theft, fraud and intimidation. Under the UK regime any person is entitled to make a request to inspect the PSC Register or request copies of it. Unless it receives permission from the courts to do otherwise, the Company must comply with such an access request.