In a significant change to the UK Companies Act 2006, UK-incorporated companies must now collect and keep information about people with significant control over them. The new rules came into force on 6 April 2016. They apply to all UK companies, other than those that are already subject to the Financial Conduct Authority's Disclosure and Transparency Rule 5 or certain equivalent overseas regimes. They also apply to UK-incorporated LLPs. In this article we focus on the practical steps which companies (and LLPs) should be taking.

For a more general review of the new regime, see our winter 2015/2016 issue.

Duty to keep a register of people with significant control

Every company should now have a register of people with significant control over it (PSC Register). The PSC Register forms part of the company's statutory books. The company must keep its PSC Register with the company's other statutory books at the company's registered office or at the alternative inspection location which the company has notified to Companies House. Failure to keep a PSC Register is an offence. Both the company and any officer who is in default may commit it.

Gathering information for the PSC Register

A company must take reasonable steps to find out whether there are any individuals (PSCs) or relevant legal entities (RLEs) who have significant control over it and meet the criteria for registration. (See the boxes "The conditions for being a PSC" and "The conditions for being an RLE" for a summary of these key terms.)

If a company has been notified that a person is a registrable PSC or registrable RLE and has all the necessary particulars about that person, it may not be necessary to conduct any further information gathering about that person. However, for a PSC (but not an RLE), it is a requirement that the individual has provided the information or that it has been provided with the individual's knowledge.

More generally, the company should send a notice to anyone it knows, or has reasonable cause to believe, is a registrable PSC or a registrable RLE. This should ask them to confirm whether they are or not, to confirm or correct any particulars included in the notice and to supply any that are missing. The company can also serve notice on anyone it knows, or has reasonable cause to believe, can identify a registrable PSC or registrable RLE or knows the identity of someone else likely to have that knowledge.

A recipient must comply with a notice within one month of its date. There is also a separate duty on a registrable PSC or registrable RLE to provide information to the company. This applies if: that person knows or ought reasonably to know they are registrable; their particulars are not on the PSC Register; they have not received a notice from the company; and this has continued for at least a month.

To ensure that information on the PSC Register is always up to date, there are also continuing information gathering duties on the company and continuing notification duties on registrable PSCs and registrable RLEs.

Failure by a company to comply with its information gathering duties is an offence. Any person who fails to comply with a notice from a company or with its own notification duties (or knowingly or recklessly provides false material particulars) also commits an offence. Any officer in default may also be liable.

The conditions for being a PSC

  • An individual who holds, directly or indirectly, more than 25% of the shares in a company;
  • An individual who holds, directly or indirectly, more than 25% of the voting rights in a company;
  • An individual who holds the right, directly or indirectly, to appoint or remove a majority of the board of directors of a company;
  • An individual who has the right to exercise, or actually exercises, significant influence or control over a company;
  • An individual who holds the right to exercise, or actually exercises, significant influence or control over the activities of a trust or firm which is not a legal entity, but would satisfy any of the first four tests if it were an individual.

A company treats an individual as a non-registrable PSC if that individual only holds an interest in the company through having significant control of an RLE. All other PSCs are registrable. There are detailed interpretive provisions on many of these terms. Every situation should be considered on a case-by-case basis.

The conditions for being an RLE

Any legal entity which the company would class as a PSC if it were an individual and:

  • is itself either obliged to keep a PSC Register; or
  • must comply with DTR 5; or
  • is traded either on another EEA Regulated Market or on a specified market in Switzerland, the US, Japan or Israel.

An RLE is registrable unless it only holds an interest in the company through having significant control of another RLE.

Enforcement

A company may serve warning notices on anyone with a relevant interest in the company who has not responded to a notice from the company. A person with a relevant interest is a person who holds any shares or voting rights in the company or has the right to appoint or remove any board member. A warning notice tells that person that the company plans to issue them with a restrictions notice.

If, after one month of the warning notice, the information remains outstanding without a valid reason, the company may serve a restrictions notice. The law does not require the company to do this, but a company should consider whether it is right to do so to meet its duty to take reasonable steps. A restrictions notice disenfranchises the relevant interest in the company. For example, the company cannot pay dividends and no rights may be exercised in respect of the interest. A restrictions notice lasts until the information has been provided or certain other circumstances prevail.

What information must be included on the PSC Register?

A company's PSC Register cannot be empty. A company must always have information about its registrable PSCs or registrable RLEs and/or an update on the state of the company's information gathering on its PSC Register.

Information gathering: The Register of People with Significant Control Regulations 2016 (the Regulations) set out the statements that a company must include on its Register on the progress of its information gathering. For example, while a company is taking reasonable steps to find out if it has any registrable PSCs or registrable RLEs, its PSC Register should state: "The company has not yet completed taking reasonable steps to find out if there is anyone who is a registrable person or a registrable relevant legal entity in relation to the company."

Registrable PSCs: Where the company has identified a registrable PSC the following information about the PSC must be obtained, confirmed and entered on the PSC Register by the company:

  • name;
  • date of birth;
  • nationality;
  • country, state or part of the UK where the PSC lives;
  • service address;
  • usual residential address (though this is protected from public disclosure);
  • the date the individual became a PSC (this is 6 April 2016 for existing companies completing a PSC Register for the first time in April 2016);
  • which of the five PSC conditions the individual meets (using the official wording set out in the Regulations); and
  • any restrictions on disclosing the PSC's information that are in place (see below).

In stating which of the five conditions the PSC meets, the company must, where relevant, quantify the PSC's shareholding or voting rights, by reference to three bands:

  • more than 25% but not more than 50%;
  • more than 50% but not more than 75%; or
  • 75% or more.

The company must not enter any of an individual's particulars in the register until they have been confirmed either by that person or by another person with the knowledge of that person.

Registrable RLEs: Where a company has identified a registrable RLE the following information must be obtained about the RLE and entered on the PSC Register by the company:

  • the name of the legal entity;
  • the address of its registered or principal office;
  • the legal form of the entity and the law governing it;
  • any register in which it appears (including details of the state) and its registration number;
  • the date it became a registrable RLE (this is 6 April 2016 for existing companies completing a PSC Register for the first time in April 2016); and
  • which of the five PSC conditions the RLE meets (using the official wording set out in the Regulations) quantified where relevant by reference to the three bands.

The required particulars must be entered on the Register once the company becomes aware of the entity's status as a registrable RLE. There is no equivalent of the confirmation requirement for individuals.

No registrable PSCs or RLEs: Where a company has taken all reasonable steps and knows or reasonably believes that it has no registrable PSCs or registrable RLEs, it must record that fact on its PSC Register.

Keeping the information up to date: A company must keep its PSC Register up to date by reflecting any relevant changes to its registrable PSCs and registrable RLEs. However, it cannot enter changes about an individual unless they have been confirmed.

Public access to PSC information

As one of a company's statutory books, its PSC Register must be accessible for inspection by any person. Any person can also ask for a copy of the Register. There is a charge of £12 per request. The only information on its PSC Register which a company must not disclose is a PSC's residential address.

The company must always tell the person wishing to inspect or have a copy of the PSC Register of the date when the PSC Register was last updated and whether there are further alterations to be made.

As with requests to inspect the register of members, anyone applying to inspect or have a copy of the PSC Register must provide their name and address and specify their purpose in seeking the information. The company must respond to the request within five working days. In that time it must either comply with the request or, if it believes the request is not for a proper purpose, it can apply to court.

From 30 June 2016, as part of the new annual return regime, companies will have to provide annual information about their PSC Registers to Companies House.

This information will be publicly available, but there will be some safeguards from public disclosure. The day of date of birth and residential address information of PSCs will be subject to the same protections as for company directors and will not be available to the public.

Additionally, if a PSC considers that they or someone they live with would be at serious risk of violence or intimidation through their wider PSC information being publicly available, they can make a protection application to Companies House. A full protection application means that no information about the PSC is publicly available at Companies House or shared by Companies House with credit reference agencies. On the relevant company's PSC Register, a note that a protection application has been made replaces the usual information. Protection starts as soon as an application is made and, if it is granted, the PSC information has indefinite protection.

BIS Guidance

As already mentioned, every UK company within the new regime (and all UK LLPs) should now have a PSC Register and be taking appropriate steps to identify and record their registrable PSCs and registrable RLEs. For some, this will be a straightforward exercise, but for others it may be more complex. The government has produced detailed Guidance on the register of people with significant control to help companies meet their new obligations. The guidance includes the various statutory wordings mentioned above as well as example notices.

Other government guidance on the new regime (for example, specific guidance on the meaning of "significant influence or control") is available from the link below.

BIS webpage: PSC requirements for companies and limited liability partnerships