Background

The Small Business, Enterprise and Employment Act 2015 (SBEEA) has introduced a number of measures to increase the accountability of companies by making it easier to see who owns or controls them and who might be making decisions about how they are run. A key element of this is the regime relating to the register of persons with significant control (PSC) over a company which falls within the regime (see the bullet point on scope below).

The regime has two aspects to it. First, relevant companies will be required to maintain their own register of persons who have significant control over them (due to come into effect from January 2016). Secondly, companies will then have to pass this information to Companies House which will make it available for free in one central, searchable public register (due to come into effect from April 2016).

What is the government consulting on?

The SBEEA provides the framework for the PSC register but statutory regulations will establish of the more detailed provisions. The Department for Business, Innovation and Skills (BIS) has issued a draft of these regulations (the Register of People with Significant Control Regulations 2015), and is seeking views on them in its consultation. The regulations cover:

  • scope – which companies will have to maintain a PSC register. The SBEEA provides that UK companies which already disclose information about their ownership under chapter 5 of the FCA's Disclosure Rules and Transparency Rules are outside the scope of the regime and that the regulations may exempt other companies which are subject to broadly similar disclosure regimes. The regulations have addressed this by extending the exemption to UK companies which have shares admitted to trading on a regulated market in another EEA state but BIS does not appear to have considered whether other overseas disclosure regimes might also be broadly similar,
  • disclosure obligation - how the disclosure obligation flows up the chain of ownership when one entity in the chain is subject to a disclosure regime,
  • how control is recorded on the register - it is proposed that this will be by stating which of five given conditions the person with significant control meets and, where appropriate, indicating the extent to which the condition is met,
  • other register entries - what a company should record in its register if it has no persons with significant control or cannot confirm information about such persons,
  • fees – under the regime, companies must provide copies of entries in their PSC register - two models for the fees that can be charged when doing so are proposed: either a flat fee charged per request (BIS' preferred option), or a fee charged per entry requested,
  • the protection regime - people with significant control will be able to apply to have some or all of their information on the PSC register withheld from the public register or from being shared with Credit Reference Agencies if they have reason to believe they are at serious risk of violence, and
  • how a company may seek to compel others to provide information - a company may take action against any person with an interest in it, if that person or entity has not responded to a request for information: the draft regulations provide that a company must first send a warning notice followed by a restrictions notice, and set out the timings and content for these notices, what constitutes a valid reason for not complying, and the process for lifting restrictions.

What's not in the consultation?

Whilst the consultation seeks views on most of the elements needed to implement the PSC register, there are a couple of aspects that BIS proposes to deal with separately. These are in respect of:

  • Limited liability partnerships (LLPs) and societas europaea (SEs)

BIS intends to create a requirement for all LLPs to hold a PSC register from January 2016. UK SEs will be included under the general company law provisions, but BIS will make certain modifications to the relevant legislation in respect of them. BIS will be seeking views from interested parties on how best to extend the PSC provisions to these types of entities. BIS is asking anyone who wants to contribute to e-mail its Transparency & Trust team at:transparencyandtrust@bis.gsi.gov.uk.

  • Foreign limited partnerships

    Some companies in the UK may be owned or controlled by a foreign limited partnership. Where this is the case, BIS only wants the PSC register to capture people who have the ability to control the management of that limited partnership (such as a general partner). BIS is developing regulations that will set out the characteristics of those foreign limited partners who willnot need to be registered as a PSC and proposes to share a draft version with interested parties soon. BIS is asking anyone who would like to contribute to the development of these regulations to e-mail its Transparency & Trust team at: transparencyandtrust@bis.gsi.gov.uk.

Inter-relation with the Fourth Money Laundering Directive (4MLD)

As we reported in our June newsletter article, the 4MLD will, amongst other things, also require EU member states to hold central registers on company beneficial ownership information. Whilst the PSC register regime will satisfy most of these requirements, there are a couple of differences which will require changes to the regime and on which BIS intends to consult in due course. The matters in question are:

  • the SBEEA only covers companies whilst the 4MLD covers all corporate and legal entities. Implementing the 4MLD will therefore require the Government to extend the PSC register regime to Scottish Limited Partnerships and some other entities. BIS intends to consult on this in 2016 in order to meet implementation in 2017, and
  • the 4MLD requires entries on the central register to be current, rather than submitted (at least) on an annual basis as under the SBEEA. Again, BIS intends to consult on the detailed changes required to do this in 2016 ahead of implementation in 2017.

Timing and next steps

Responses to the consultation should be received by BIS by 17 July 2015. Responses will be used to help finalise the draft regulations which will be laid before Parliament in the autumn. To see the consultation paper, click here. The response form is available electronically on the consultation page of the BIS website.

In parallel with the consultation, BIS is preparing detailed guidance to help companies and shareholders understand their obligations. It intends to publish this in the autumn. BIS states that Companies House are also working with users to make the process for giving information to them via the Companies House website as straightforward as possible.