The SBEEA (Part I: People with Significant Control)

Against the backdrop of an increasing push for greater transparency of company ownership, the Small Business Enterprise and Employment Act 2015 (“SBEEA“) took effect on 6 April 2016 which implements the beneficial disclosure requirements of the EU Fourth Money Laundering Directive. The SBEEA imposes a requirement on UK companies and LLPs to maintain a register of significant beneficial ownership information and creates a central registry for such information to be publicly accessible via Companies House.

Who do the rules affect? The new rules will apply to most UK companies and LLPs, with some minor exceptions (e.g. LSE main market and AIM companies).

What is the upshot of these rules? Companies and LLPs must maintain a Person with Significant Control (‘PSC’) register and from June 2016, entities are now required to include the PSC information in their Confirmation Statement (to replace the Annual Return) at Companies House.

Who is a ‘person with significant control’? A PSC will meet at least one of the following conditions:

  1. Directly/indirectly hold more than 25% share capital;
  2. Director/indirectly control more than 25% votes at general meetings;
  3. Directly/indirectly control the appointment/removal of a majority of directors;
  4. Actually exercise/have the right to exercise significant influence or control; or
  5. Actually exercise/have the right to exercise significant influence or control over any trust or company that satisfies one of conditions 1 – 4 above.

The Government’s statutory guidance advises that “control” might be indicated where a person can direct the activities/policies of a company; and “significant influence” where that person can ensure that any desired activities/policies are generally adopted.

What do companies need to do? An officer of the company will be required to (1) identify PSCs over the company (or any legal entities that might be classed as a PSC) and confirm their details (inter alia: name, DOB, nationality, residential address and country of usual residence, service address (residential address and DOB will be supressed on the public register)); (2) record such details on the company’s PSC register; (3) provide such information to Companies House; and (4) maintain the company’s PSC register up to date.

Penalties for non-compliance. Companies must take reasonable steps to ascertain any PSCs over their company, non-compliance of which can attract criminal penalties. Where an individual ought reasonably to know that they are a PSC, they are under a duty to inform the company of their interest, non-compliance of which can also attract criminal penalties.

Further Guidance. The statutory guidance referred to above is in force and companies are obliged to adhere to this guidance when analysing conditions 4 and 5 above. The Government has also produced useful non-statutory guidance for companies, LLPs and PSCs to aid in the identification of PSCs.

Future Developments in Real Estate and Public Contracting. Separately, the UK Department for Innovation and Skills issued a consultation paper in March 2016 on “Beneficial ownership transparency: Enhancing transparency of beneficial information foreign companies undertaking certain economic activities in the UK”. The consultation moots the concept of enhancing disclosure of ultimate beneficial ownership information on foreign companies owning UK real estate and entering into public procurement contracts because the Fourth Money Laundering Directive applies to EU incorporated entities only. The consultation proposes that companies that are incorporated in countries that publicly provide equivalent beneficial ownership information will be exempt provided that company register information is provided (see more here).