Update on the implementation of PSC registers and other changes to company law and corporate governance.

The landscape of legislation relating to company transparency and filing requirements is changing as we know it - just not as quickly as was originally planned. The updated implementation dates of the various requirements brought in by the Small Business, Enterprise and Employment Act 2015 have been published by Companies House and confirmed by the department for Business, Innovation and Skills. We understand that the dates are however still subject to change, depending on the progress of the regulations through Parliament this autumn.

Below are the currently anticipated implementation dates of the various changes, and further information on the requirements relating to the keeping of registers of persons with significant control (“PSC Registers”).  For further details of these changes to company law in the UK, please see our article from May this year.

10 October 2015

  • October 2015 will see the removal of the requirement to include the day in a director’s date of birth in the public register at Companies House.
  • The time scales involved in the processes required to strike a company off the register at companies house will be reduced.
  • New directors and secretaries of a company will no longer need to sign a form in order to prove their consent to act. This will instead be confirmed by a statement made by the company in question and Companies House will then write to the officer to confirm their appointment and their duties.

December 2015

New and simpler processes related to disputes in respect of registered offices and directors will come into force.

April 2016

Companies will be required to keep PSC registers from April next year – see further details below.

June 2016

  • From June, companies will be required to file their PSC register with Companies House.
  • The obligation to file an annual return will be replaced by the requirement to “check and confirm” various matters by filing a confirmation statement with Companies House, notifying any changes at least once in any 12 month period.  
  • From June next year companies will be able to opt to keep certain of their registers on the public register at Companies House, instead of keeping such registers separately at the company’s registered office.
  • The regime relating to directors’ disqualification for misconduct will be updated and strengthened.
  • The simplification of the requirements relating to the statement of capital will come into force.

October 2016

From October next year, the prohibition on corporate directors will come into force. Exceptions to this prohibition are likely and currently the subject of consultation.

Late 2016/Early 2017

From late 2016/early 2017 companies will be permitted to voluntarily file additional information at Companies House, although what information will be included is yet to be confirmed.

PSC Registers

From what will now be April 2016, all companies (except those to which Chapter 5 of the Disclosure and Transparency Rules sourcebook applies or similar requirements where UK companies are listed overseas) will be required to keep a public register of people with “significant control” over them (a “PSC Register”) in addition to their other statutory registers.  The requirement to file this information with Companies House will not take effect until June 2016.

The implementation of this section of the Small Business, Enterprise and Employment Act 2015 is part of a Europe-wide initiative to make companies more transparent to encourage trust, and also to assist authorities in dealing with tax evasion and money laundering.

The PSC register will need to be updated annually, using the confirmation statement which is to replace the annual return, and must be available for inspection at a company’s registered office.  Companies also have the option to elect to keep such information on the centralised public record at Companies House instead of in a separately maintained PSC Register.  On incorporation, a statement of those persons holding initial significant control will need to be included in the documents filed with Companies House.

A person exercises “significant control” over a company if he/it (alone or as one of a number of joint holders) meets one or more of the following conditions:

  1. Directly or indirectly owns more than 25% of the shares in the company, calculated by reference to the nominal value of the shares in the case of a company with a share capital. If the company does not have a share capital, this condition is met by an individual holding a right to share in more than 25% of the entity’s capital or profits.
  2. Directly or indirectly holds more than 25% of the voting rights in the company. Voting rights held by the company itself are to be disregarded for this purpose.
  3. Directly or indirectly holds the right to appoint or remove a majority of the board of directors of the company.  It is conceivable that any such rights in shareholders’ or joint venture agreement could by caught by this condition.
  4. Has the right to exercise, or actually exercises, significant influence or control over the company. 
  5. Has the right to exercise or actually exercises significant influence or control over a trust or firm that is not a legal entity, which in turn satisfies any of the first four conditions listed above.

An expert working panel is drafting statutory guidance on the meaning of "significant influence and control” and this guidance is due to be published in autumn 2015. It is also worth noting that the government intends for the particulars in the PSC Register to include note of which of the “significant control” conditions applies to each individual listed therein and is also looking into the possibility of exceptions to inclusion in the PSC Register.  Where either of the first two conditions applies, there may also be a requirement to state the percentage of shares or voting rights held, either specifically or by reference to certain bands of percentages (e.g. more than 25% but less than 50%).

The PSC Register must only include the particulars of those persons and relevant legal entities that have significant control over a company. A “relevant legal entity” is a legal entity that would have been a person with significant control if it had been an individual and is subject to its own disclosure requirements as specified in the Companies Act 2006. As exemplified below and to prevent unnecessary duplication, this means that company B would need to be listed in the PSC register of company A, but company C would not (although company C would need to be included in the PSC register of company B):

Click here to view the image.

A company is obliged to investigate and keep up to date its information on each person with significant control (“PSC”).  This includes requirements to give notices to PSCs or persons who have knowledge about PSCs in order to obtain information.  

There is also a positive obligation of disclosure for individuals and legal entities who may be PSCs, in order to assist companies in ensuring information is correct and up to date. Companies will be able to apply sanctions if an individual or legal entity does not comply with these disclosure requirements, which include the ability to place restrictions on shares without a court order as long as certain requirements are met.

Guidance is currently being drafted to assist companies and PSCs with these new requirements. It is also anticipated that limited liability partnerships will be required to keep a PSC register from January 2016. 2017 is likely to see the requirement for companies to update the public register at Companies House at the time of any change to the PSC register, instead of on an annual basis, to ensure that the PSC register is current and complies with anticipated European law in respect of money laundering.