All UK unquoted companies and limited liability partnerships are now required to keep and maintain new registers of people with significant control (PSCs). A register is to be kept at the relevant company’s office (or other inspection address). Recorded details on registers should include a PSC’s name; service and residential address; nationality and so on.

The UK’s move forms part of a wider international transparency initiative, which includes the Fourth Anti-Money Laundering Directive. The PSC regime directly affects companies, shareholders and beneficial owners. Those that are the ultimate owners or controllers of a company will now be identified, with details of their interests made public.

As of 30 June, PSC information was required to be filed at Companies House, forming part of a company’s annual confirmation statement.

The new rules will need to be considered by secured lenders, in the context of taking and enforcing security over shares.

Who must keep a register?

PSC register requirements capture unquoted UK companies, UK LLPs and SEs, including wholly-owned subsidiaries and dormant companies.

The following will not fall within the PSC ‘net’:

  • a UK branch of an overseas company
  • English or Scottish limited partnerships

However, a General Partner or manager that is a UK company will need to keep a PSC register.

Who must be named on a register?

A person with significant control over a relevant company will meet at least one of the following five Conditions:

  • Condition 1 – he directly or indirectly owns more than 25% of its shares (or has a right to more than 25% of the entity’s capital or profits)
  • Condition 2 – he directly or indirectly holds more than 25% of its voting rights
  • Condition 3 – he directly or indirectly has the power to appoint or remove the majority of its board of directors
  • Condition 4 – he has the right to exercise, or actually exercises significant influence or control over the company
  • Condition 5 – he 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.

A PSC is generally an individual. Corporate shareholders that are ‘subject to their own disclosure regimes’ may be entered on the register, and are known as ‘relevant legal entities’ (RLEs).The reasoning behind this is that one can look at the entity’s own register to investigate further up the chain until it’s possible to identify the individuals at the top.

When a corporate shareholder isn’t an RLE, the UK company completing its register will be required to ‘look through’ to the individuals or RLEs that have a majority stake in that entity.

The following are not RLEs:

  • English and Scottish limited partnerships
  • overseas companies.

Some implications for secured lenders

Shareholders who are PSCs or RLEs must respond to requests for information from the company whose shares they are holding. A failure to respond will mean that the requesting company could suspend voting rights, transfer rights, the payment of dividends or place other restrictions on the rights attaching to those shares.

This has obvious implications for lenders who are taking a charge over shares; or enforcing their security.

Suggested secured lender protections

Prior to taking a share charge, one should check the company’s PSC register.

Incorporating the following into the contractual arrangements should be considered as they may afford a measure of protection:

  • Conditions precedent to drawdown – taking certificates from the chargor and company stating that no restrictions notice has been issued in respect of the shares
  • Undertakings – from the chargor, to comply with any requests for information and also from the company, stating that it will notify the lender of any such requests
  • Repeating representations – from the chargor, to the effect that no restriction notices have been issued.