With effect from April 2016, most UK companies and LLPs will be required by law to keep and maintain a new register of people with significant control over the company or LLP. In this article we highlight the new requirement and what it means for you.
What is the new requirement?
All UK companies (apart from certain public companies) and all UK limited liability partnerships ("LLPs") will be required to keep a register of people with significant control over the company or LLP (a “PSC Register”). This has never been a requirement previously.
The PSC Register will identify and record the people who own or control the company or LLP. Companies and LLPs will also be required to make this information public by filing it at Companies House.
The intention is that the PSC Register will help to increase transparency, help to inform investors and also support law enforcement agencies in money laundering investigations.
Who has significant control?
Very broadly speaking, a person has significant control of a company if they:
- hold more than 25% of the nominal value of the company's issued shares;
- hold more than 25% of the voting rights in the company;
- hold the right to appoint or remove a majority of the board of directors of the company;
- have the right to exercise, or actually exercise, significant influence or control over the company; or
- exercise or have the right to exercise significant influence or control over a trust or firm, which itself meets any of the above conditions.
The test for LLPs is similar.
Companies and LLPs will be under a duty to take reasonable steps to identify people with significant control and to keep their PSC Register up to date. People with significant control will be under a corresponding duty to notify the company or LLP of their interest. In both cases failure to comply is a criminal offence.
When does this new requirement take effect?
Existing companies and LLPs will be required to start keeping their PSC Registers from 6 April 2016 and, from 30 June 2016 the information will need to be included in their annual confirmation statements (which will shortly replace annual returns).
What do you need to do?
Based on what we currently know, it is likely that at the very least you will need to contact all shareholders or members and ask them to confirm and/or provide various details to enable you to fully complete your PSC Register.
However, neither the law nor the official guidance in relation to the PSC Register is as yet complete and so for now, we wouldn't advise doing anything beyond starting to consider whether you have any people with significant control in relation to your company or LLP.
For many companies and LLPs the PSC Register may not actually create that much additional work. For example, in many small private UK companies the people who are the registered shareholders are the only people interested in the shares and while it will be necessary to include in the PSC Register the details of any shareholder who owns over 25%, this should be relatively straightforward. Things may be more complicated where shares are held by overseas companies or on behalf of others, for example, through trusts or if you are a private equity backed business.