Recent legislative changes in the UK have introduced a requirement for most UK companies to maintain a public register of persons with "significant control" over the company (a PSC Register). Prior to the introduction of the new rules, only the legal owners of shares were identified on the share register of a company. The UK government has introduced the new rules so as to obtain a full picture of both the legal and beneficial ownership of companies, with the overall aim of increasing corporate transparency and combatting tax evasion, money laundering and terrorist financing.
While there are currently no rules in Ireland requiring the identification of beneficial owners of shares, this is due to change once the provisions of the Fourth Anti-Money Laundering Directive (AMLD4) are transposed into national law.
UK PSC Register
An individual with "significant control" of a company will meet at least one of the following PSC criteria:
- Holds (directly or indirectly) more than 25% of the shares or more than 25% of the voting rights in the company
- Has the right (directly or indirectly) to appoint or remove a majority of the board
- Has the right to exercise, or actually exercises significant influence or control over the company
- Has the right to exercise, or actually exercises significant influence or control over the activities of a trust or firm which in turn has control over the company by virtue of (a) – (c) above
In addition, a company that is owned or controlled by a legal entity may need to include details of that legal entity (a Relevant Legal Entity) on the PSC Register. A Relevant Legal Entity (RLE) is one which meets one or more of the PSC criteria outlined above and is subject to its own disclosure requirements (i.e. has to maintain its own PSC Register or is subject to transparency rules).
A company must take reasonable steps to investigate, obtain and update information on registrable PSCs and RLEs. It must serve notice on anyone whom it knows or has reasonable cause to believe is a PSC or RLE requiring them to confirm the precise nature of their interest.
It is a criminal offence to fail to respond to such notices and in such circumstances a PSC or RLE also faces the risk of having its shareholder rights in the company suspended, such as the right to vote, to receive dividends or to transfer shares.
The PSC Register must be available for public inspection, subject to certain limited exceptions. Any person is entitled to make a request to inspect the PSC Register and unless the company receives permission from the court to refuse a request on these grounds, it must make the Register available.
From 30 June 2016, the information on the PSC Register must also be submitted to the UK Companies House at least every 12 months and it will be held on a database that can be searched by the public.
AMLD4 requires EU Member States to ensure that corporate entities obtain and hold adequate, accurate and current information on their beneficial ownership. As it stands, AMLD4 states that this information must be accessible to:
- Competent authorities and financial intelligence units
- Firms, when carrying out customer due diligence measures
- Those who can demonstrate a "legitimate interest" in the information
However, the European Commission has recently published a proposal to amend AMLD4 to oblige Member States to ensure that information relating to the beneficial ownership of corporate and other legal entities (other than those which are not profit-making) is publicly available. AMLD4 was due to be transposed in Ireland by 26 June 2017, but the Commission is seeking to bring this date forward to 1 January 2017.
Therefore, it is clear that Ireland will need to legislate for some form of register of beneficial ownership of shares in order to meet its obligations under AMLD4.
Positive action is now required of all UK companies within scope of the new rules. The requirement to put a PSC Register in place applies from 6 April 2016 and companies must submit their PSC information to UK Companies House from 30 June 2016 onwards.
Irish individuals and companies that are the beneficial owners of shares in UK companies should bear in mind that they may be served with notice by those companies to confirm the nature of their interest in the shares. Irish companies with UK subsidiaries will be affected by new provisions as a UK subsidiary will be required to keep a PSC Register.
In addition, Irish companies and shareholders should be aware that similar rules in relation to the disclosure of beneficial interests in shares will be put in place in Ireland over the coming year.