Persons with Significant Control Register
The persons with significant control regime ("PSC") came into effect in the UK on 6 April 2016. It requires all unlisted UK companies to maintain a register of people who have "significant control or influence" (known as a "PSC Register"). PSC Registers have to be filed at Companies House and are publically accessible. Non-compliance with PSC Register requirements carries criminal penalties.
Who has to keep a PSC Register? All UK incorporated companies (that are not exempt) and all UK LLPs. The exemptions are narrow and relate to companies that are listed on certain exchanges in the UK, EEA, Israel, Switzerland or the USA. Even an exempt company needs to consider PSC requirements if it has subsidiaries that are UK companies and/or LLPs in its group structure.
Who or what is a PSC? A PSC can be either individuals (of any nationality or domicile) or RLEs (registrable relevant legal entities). RLEs include UK incorporated companies, UK LLPs and non-UK companies listed on certain stock markets. Unlisted overseas legal entities are not RLEs and therefore, are not required to be named on PSC Registers. An individual or a RLE becomes a PSC when one or more of the following conditions are met:
- the individual or RLE directly or indirectly holds more than 25% of the shares (by nominal value) or voting rights in the company;
- the individual or RLE directly or indirectly holds the right to appoint or remove the majority of the board of directors of the company; or
- the individual or RLE has the right to exercise, or actually exercises, significant influence or control over the company. This last limb will be of particular interest to private equity funds and others exercising certain contractual controls over portfolio companies (see below re significant influence and control).
What is "significant influence or control"? Statutory guidance sets out examples of what will, and will not, constitute "significant influence and control". Examples provided that satisfy the test include:
- if a person or RLE has absolute decision making rights over the running of the business, including adopting or amending the company's business plan or incentive scheme; making additional borrowings; appointing or removing the CEO; and
- if a person or RLE has absolute veto rights over business decisions such as the adopting or amending of the company's business plan, the appointment of the majority of the company's board and the making of additional borrowings.
Key points to remember. As of 6 April 2016 all UK companies and LLPs (unless exempt) have had to keep a register of people with significant control over them. As of 30 June 2016 this PSC Register has had to be filed at Companies House. Those that must be listed include ultimate beneficial owners with interests greater than 25% as well as others that benefit from certain contractual controls over the relevant company or LLP.
Electricity Storage in the UK
The UK's electricity market is undergoing profound change. In order to meet de-carbonisation targets, there has been a significant increase in the deployment of wind and solar generation sources. These so-called intermittent sources cannot be switched on and off at will which leads to balancing issues within the grid.
In response to this, the Government is promoting the deployment of large-scale energy storage facilities which can be made available on short notice. In August, the National Grid announced the winners of its first bid round for large-scale storage to support the grid. The preferred technology is battery storage. In the Autumn, the Government is expected to publish a consultation document on the regulatory aspects of storage, with a view to clarifying and simplifying the current licensing regime.
The rapid development of large-scale storage at grid level has also prompted increased interest in so-called "behind the meter" applications. These applications offer private equity investors in energy-intensive industries significant potential savings. In particular, costreduction through "peak shaving" (ie going "off grid" during peak pricing periods by using stored energy obtained off peak), avoiding charges levied for use of distribution networks in peak periods, increased resilience of energy supply which is of particular importance for data centres, and even for revenue generation through provision of ancillary services to the National Grid as described above.
One of the key economic drivers for the viability of behind the meter storage is the net difference in energy price between peak and off-peak periods. Although the overall level of energy consumption is decreasing, peak levels of consumption are increasing. The price gap is therefore getting wider, and this trend is set to continue. Such factors lie behind the predictions of various analysts that the uptake of energy storage is likely to increase exponentially in the short to medium term. The development of this market will therefore have positive knock-on effects for private equity portfolio companies, especially those operating in energy-intensive sectors.
Sale and Purchase Agreement Warranties Also Representations?
In the recent case of Idemitsu Kosan Co Ltd v Sumitomo Co Corp  EWHC 1909 (Comm), Idemitsu, as buyer in a share purchase agreement ("SPA"), was unable to bring a claim for breach of warranty due to the expiry of the notification period for warranty claims under the SPA. Instead, Idemitsu brought a claim for damages for misrepresentation in tort and under s.2(1) of the Misrepresentation Act 1967, claiming that certain matters which were warranted under the SPA were not true on the date of signing and, by presenting the SPA for execution, the seller gave an untrue statement or fact, that gave rise to an actionable claim for misrepresentation by the buyer that was not subject to the limitations in the SPA.
The court granted summary judgment, dismissing the buyer's misrepresentation claims. It held that where a contractual provision states only that a party is giving a warranty, that party does not, by concluding the contract, make any statement to the counterparty that is actionable as a misrepresentation. It was an important factor in this case that the SPA included an entire agreement clause, by which the buyer had agreed that it had not relied on, or been induced to enter into the agreement by, any representations or warranties other than the contractual warranties set out in the SPA.
Further delays for the proposed ban on corporate directors
AspartoftheGovernment's initiativetoincreasetransparencyandaccountabilityincorporate management and control, the Small Business, Enterprise and Employment Act 2015 (the "SBEE 2015") will introduce restrictions on the appointment and continued use of corporate directors. At present, UK companies are permitted to have corporate directors that is, one or more legal persons (such as a company, or LLP who are directors) provided one director is a natural person (i.e. an individual). However, the effect of the SBEE 2015 will change the current position and will require, subject to exceptions which to date have not been published, all directors to be natural persons and prohibit the appointment of corporate directors. Once implemented the SBEE will ban the appointment of new corporate directors and the appointments of existing corporate directors will automatically cease after a 12 month grace period. The ban on corporate directors was scheduled to come into force in October 2016 but the Department of Energy and Industry Services ("DEIS") has delayed the ban. While no new implementation date has been set, DEIS still intends to implement the ban on corporate directors.