With effect from April 2016, UK companies (other than listed and quoted companies that are subject to Chapter 5 of the FCA’s Disclosure Rules and Transparency Rules sourcebook (‘DTR5’)), will need to identify their ultimate beneficial owners and maintain a register of people with significant control over them.

The new measures will require companies to:

  • take reasonable steps to identify their beneficial owners and those people who exercise significant control over them (commonly referred to as ‘PSCs’), including by serving notice on anyone they believe is, or may be able to identify, a PSC;
  • record the details of their PSCs (including the nature and extent of their control), in a new statutory register, commonly referred to as the ‘PSC register’, which must be available for inspection by members of the public;
  • keep the PSC register up-to-date; and
    ​with effect from 30 June 2016, file this information at Companies House.

Subject to very limited exceptions, (namely where there is a significant risk of a person being subjected to violence or intimidation and an application is made by or on that person’s behalf) and, with the redaction of some personal data, the information will be included on the public register at Companies House.

The requirements will also apply to UK LLPs, although the detail of how they will apply to LLPs has yet to be confirmed.

The introduction of the PSC register and the requirement for the information to be made public, will enable the chain of ownership of companies to be traced to the ultimate beneficial owners, even where those owners have deliberately chosen corporate structures to ensure their privacy.

The Government’s intention is that the PSC register, taken together with the company’s register of members, will give a complete picture of the ownership and control of UK companies, thereby increasing corporate transparency and deterring the use of UK companies as vehicles for illegal activity, assisting the investigations of law enforcement and tax authorities and encouraging trust, growth and investment in the UK.

The new requirements derive from the Act and the Register of People with Significant Control Regulations 2015, which have been published in draft and are expected to be laid before Parliament in the autumn.

What information must be recorded in the PSC register?

The PSC register will record details of:

  • all natural persons who meet one or more of the criteria to be PSCs - unless their only interests in the company are held through one or more ’relevant legal entities’ (referred to below) or they only meet the criteria by reason of being, or having an interest in, a limited partner in a limited partnership (this is likely to be an important exception for investment funds); and

  • any legal entities, referred to as ‘relevant legal entities’, that would meet one or more of the criteria if they were natural persons, for example, intermediate holding companies, provided that they are themselves required to keep a PSC register or are subject to disclosure obligations under (or deemed equivalent to), the requirements of DTR5.

The criteria for being a PSC are broadly that, whether directly or indirectly, a person:

  • owns or has the right to exercise more than 25 per cent of the shares or voting rights in the company;

  • has the right to appoint or remove a majority of the board of directors; or

  • has the right to exercise, or actually exercises, significant influence or control over the company (whether directly or by exercising significant influence or control over a trust or firm that is not a legal entity and which satisfies one or more of the other criteria).

While some of the tests are clear, it may be difficult to determine whether someone has significant influence or control. The Government has said that it will publish statutory guidance to be referred to in determining whether or not a person exercises, or has the right to exercise, ‘significant influence or control’ and what is meant by that expression, together with general guidance for companies and owners to explain the new duties. The guidance is expected in the autumn, which will not give affected companies and owners long to get to grips with the requirements before April.

Failures to comply with the new duty to investigate beneficial ownership and control or to maintain the PSC register are criminal offences by the company and its directors. From a PSC’s point of view, failing to provide the company with the required information to be included in its PSC register is a criminal offence and could also result in the PSC’s interest in the company being frozen (meaning that they will be unable to receive dividends or transfer their shares).

Given the relatively limited period of time between the expected publication of the regulations and guidance supporting the new legislation, companies should be taking steps now, in readiness for compliance in April.

What can companies do to prepare?

  • Review the register of members and try to identify if there is anyone other than a registered member who may be a PSC.

  • Take steps to investigate ultimate beneficial ownership of the company where it is not the same as the registered membership and is not already known to the company.

  • Contact shareholders and likely PSCs and make sure they are aware that their information may be publicly disclosed. This may be particularly significant in relation to foreign PSCs, to whom a requirement for public disclosure of financial and business interests may come as a surprise. If affected persons, who would otherwise be PSCs when the requirements come into force in April, act quickly, they may be able to reorganise their affairs so that they no longer meet the criteria for being PSCs or, in appropriate circumstances, make an application for their information to be withheld from the register at Companies House.