Since 6 April 2016, all UK companies and UK LLPs have been required to maintain a register of all those persons who have significant control over the company or LLP

The PSC regime – are you compliant?

Since 6 April 2016, all UK companies (UK listed companies are broadly exempt) and UK LLPs (Limited Liability Partnerships) have been required to maintain a register of all those persons who have significant control over the company or LLP. This persons of significant control register is commonly known as the PSC register. Since 30 June 2016, companies and LLPs have also been required to deliver PSC information to Companies House when making their annual confirmation statement.

We regularly come across companies and LLPs who are not complying with the new PSC regime. Some are not aware of its existence. It is essential that all businesses operating via a limited company or LLP understand the PSC regime and comply with it as there are criminal sanctions for non-compliance. This is a particular issue for farming companies, which are frequently controlled and owned by one family but where the underlying ownership may be held in trusts and need further consideration

Who is affected by the change?

All UK companies and LLPs are required to keep and maintain a PSC register including subsidiary and dormant companies. The only exceptions are for certain publicly traded companies.

Who needs to be included on the PSC register?

An individual is a person who exercises significant control (a PSC) over a company if the individual meets any one of the following five conditions.

  1. Holds, directly or indirectly, more than 25% by nominal value of the company’s shares.
  2. Is entitled, directly or indirectly, to exercise more than 25% of the voting rights of the company.
  3. May, directly or indirectly, appoint or remove a majority of the board of directors of the company.
  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 which is not a legal entity but which itself satisfies one of the above conditions.

An individual is a PSC over an LLP if the individual meets any one of the following five conditions.

  1. Holds, directly or indirectly, rights over more than 25% of the surplus assets of the LLP on a winding up.
  2. Holds, directly or indirectly, more than 25% of the voting rights in the LLP.
  3. Holds the right, directly or indirectly, to appoint or remove a majority of those involved in the management of the LLP.
  4. Has the right to exercise or actually exercises significant influence or control over the LLP.
  5. Has the right to exercise or actually exercises significant influence or control over a trust or firm which is not a legal entity but which itself satisfies one of the above conditions.

There are specific provisions dealing with interests held through trust arrangements, joint interests, nominee arrangements and limited partnerships. There are also provisions dealing with indirect holdings through a chain of entities which may mean that a legal entity itself, rather than an individual, needs to be included on the PSC register where it would meet the test for significant control if it were an individual and it holds its own PSC register or is a publicly listed company. These are known as registrable Relevant Legal Entities (RLEs).

Statutory guidance has now been published on the meaning of significant influence or control in the context of both companies and LLPs.

What information needs to be included on the PSC register?

The register must include the individual’s name, service address, nationality, date of birth and country of residence and the date on which they become registrable on the PSC register together with confirmation of which of the conditions for being a PSC the individual meets. The individual must confirm the information before it appears on the register.

The usual residential address of all people within significant control is kept by the company but does not appear on the registers that are available to the public (the PSC register and the Companies House central register). If the disclosure of a PSC’s details would put the individual at serious risk of violence or intimidation, the PSC can apply for further PSC information to be protected.

With regards to a registerable RLE, the register needs to include the RLE’s name, registered or principal office address, the legal form of the entity and the law by which it is governed, the register in which it appears and its registration number (if applicable), the date it became a registrable RLE and which of the five conditions for being a PSC it meets.

How does this new regime work?

Companies and LLPs are obliged to investigate, obtain and update information about relevant individuals and legal entities that have control over it and accordingly maintain and update their PSC register. There is prescribed wording to be adopted when completing the register. They must also file that information at Companies House with their annual confirmation statement (formerly their annual return). Private companies may opt to have the PSC information held solely at Companies House and not maintain a separate PSC register as well. As the register at Companies House was not available until 30 June 2016, a company was required to have its own register between 6 April and 30 June 2016 and it must retain that historical register. There are also obligations on a person who has significant control over a company or LLP to inform the company or LLP (as the case may be) of that fact and provide the relevant information for the PSC register. A company or LLP can impose voting, transfer or other restrictions on the relevant person who fails to comply

What next?

Companies and LLPs should take immediate action to ensure that their PSC register is in place and is populated with relevant information of its PSCs and RLEs. If for any reason they do not have the relevant information, they still need to ensure that they have the appropriate official wording recorded in their PSC register.