The Small Business, Enterprise and Employment Act 2015 will require all UK companies to maintain a register of those people who have significant control over the company. This new register of 'people with significant control' will be known as the "PSC" register.
This is part of the UK government's drive to improve corporate transparency.
Often individuals who control a company are different from those listed on the company's register of shareholders and therefore in many cases the PSC register will look quite different to the information currently available at Companies House.
Who is a person with significant control (PSC)?
A PSC with significant control will need at meet least one of the following five conditions:
- Directly or indirectly hold more than 25% of the nominal share capital; or
- Directly or indirectly control more than 25% of the votes at general meetings; or
- Directly or indirectly be able to control the appointment or removal of a majority of the board; or
- Actually exercise, or have the right to exercise, significant influence or control over the company; or
- Actually exercise, or have the right to exercise, significant influence or control over any trust or firm (which is not a legal entity) which has significant control (under one of the four conditions above) over the company.
When do the new rules come into force?
The new rules will apply to all UK incorporated companies, except publically trading companies, as these companies are already required to make details of major shareholdings public.
Companies will be required to maintain a PSC register from 6 April 2016 and from 30 June 2016 they will be required to file the information at Companies House.
The rules are also expected to be extended to apply to UK registered limited liability partnerships.
What will the PSC register contain?
The register will hold the following information on PSCs.
For individuals on the PSC register, personal information will need to be disclosed including name, date of birth, nationality and address. The register will withhold the full dates of birth and residential addresses from the publicly accessible database for safeguarding purposes.
The register will also record which of the five conditions of the significant control the registerable person or relevant legal entity meets. The register will also include the date on which the beneficial interest in the company was acquired.
A company's PSC register will be kept at its registered office and will be available for public inspection in the same way as the register of members. The information on the PSC register will also need to be confirmed at Companies House at least every 12 months and will be held on a publicly searchable database.
How does this affect a trust that is a PSC?
Where a company is held through a trust, the trustees, as shareholders, may be persons exercising significant influence or control over the company (according to the criteria above) and the trustees of the trust should be declared as a PSC.
In most cases, it is unlikely that the beneficiaries or settlor of the trust would themselves be PSCs. In a properly manged discretionary trust, provided the trust is genuinely managed and controlled by the trustees who exercise their discretion (rather than taking decisions at the request of a settlor or principal beneficiary), there should be no need to disclose the settlor or beneficiaries, as none of them have any absolute right or control over the trust's assets. It therefore continues to be important to ensure that discretionary trusts are managed correctly, as is currently the case for other more general asset protection reasons. Regular trustee meetings, minuted trustee decisions and trustees taking time to properly consider requests should help with this.
In some limited circumstances the ultimate beneficiaries of the trust may need to be disclosed as PSCs if they are absolutely entitled to an interest that equates to more than 25% of the underlying company. Similarly, beneficiaries or settlors of the trust may need to be disclosed if, in fact, they exercise significant influence or control over the trust (for example if they have the right to appoint and remove trustees) or underlying company.
What is the position for offshore companies and LLPs?
The rules only apply to UK companies and LLPs and not to foreign entities operating in the UK or to overseas companies which have UK PSCs.
These rules come into force on 6 April 2016 and failure by a company to maintain their PSC register or failure by a beneficial owner to provide the required information will be a criminal offence.
Companies must therefore put in place a system to ensure that they can adequately maintain their own PSC register. They must be able to demonstrate that they have taken reasonable steps to identify people they know or suspect to have significant control. Companies will also be required to update the information if they know, or might reasonably be expected to have known, that a change to their PSC has occurred.
Trusts with underlying companies should continue to ensure that they are properly administered with the trustees genuinely managing and controlling the trust fund.
PSCs will also have a responsibility to inform the company of any changes to the information recorded on their register.