It is expected that, from 26 June 2017, changes being made to the UK’s ‘People with Significant Control’ regime (PSC regime) to comply with the European Fourth Money Laundering Directive ((EU) 2015/849) (MLD4) will mean that:
- the current exemption that applies to companies traded on AIM will fall away; and
- all companies subject to the regime will have to provide updates to Companies House differently and more frequently.
Why are these changes being made?
There is a requirement under Article 30 of MLD4 for companies to obtain and hold information on their ‘beneficial ownership’ and for such information to be included on a central register. In the UK, BEIS is intending to adapt the PSC regime to comply with the requirements under 4MLD. Members States have until 26 June to implement the relevant measures.
Under 4MLD, companies can be exempted from the regime if they are admitted to trading on a ‘regulated market’. Although UK companies traded on AIM are subject to Chapter 5 of the Financial Conduct Authority’s Disclosure and Transparency Rules (DTR5) in the same way as the Main Market (which is a ‘regulated market’), AIM is a ‘Multilateral Trading Facility’ and not a ‘regulated market’.
The prevailing interpretation of 4MLD is that there is no scope to include AIM within the 4MLD exemption, albeit that it may be subject to an equivalent transparency regime through DTR5. We have been involved in making representations to BEIS on this point, but understand that BEIS will not be taking the issue further and that AIM traded companies will likely need to comply with the PSC regime in addition to DTR5. For the other ‘specified markets’ exempted under the PSC regime (for example NYSE, NASDAQ and Tel Aviv) the exemption is expected to continue to apply.
What does this mean for AIM traded companies?
Currently, UK companies traded on AIM are not required to maintain a PSC Register, as there is an exemption from the requirement to do so under the PSC regime. The rationale is that DTR5 provides a sufficient equivalent transparency regime, so that there is no need to subject companies to the PSC regime as well.
However, from 26 June it is likely that such companies will fall within the PSC regime and so have to maintain a PSC Register and make the necessary filings at Companies House so that PSC information is publicly available through the Companies House website.
Many will already have had to deal with the PSC regime where they have UK subsidiaries or other interests which fall within the regime, but this will be the first time that the publicly traded company itself has had to be considered.
For further information about the current PSC Regime itself please visit our dedicated PSC Regime page.
There are also other changes anticipated to how the PSC Regime operates, which will affect all companies under the regime.
What other changes are being made to the PSC Regime?
In addition to the increase in the scope of entities that will fall within the regime, the other key anticipated change is to the way and frequency with which companies have to update the public register through filings with Companies House.
Currently, PSC information is submitted to Companies House to be included on the public register as part of companies’ confirmation statements, meaning that it must be updated at least once a year.
It would appear that BEIS will be interpreting the requirement under 4MLD requiring the central register of ‘beneficial owners’ to be ‘current’ into a requirement within the PSC regime that changes are updated in the company’s register within 14 days and then filed at Companies House (on new PSC forms) within a further 14 days. The various issues this creates were highlighted to BEIS in response to their consultation, but again it would seem that the approach will be to implement these new 14 day time periods.
Why is there still some uncertainty?
The BEIS consultation on the implementation of the relevant part of 4MLD ran from 3 November to 16 December 2016, which we were involved in responding to through membership of both Law Society and Quoted Companies Alliance committees, which also held discussions with BEIS. Unfortunately, the calling of the General Election for 8 June began the ‘purdah’ period which restricts the activities of civil servants and has meant that we have not had the same access to the relevant individuals within BEIS, who have also been restricted in taking forward the consultation.
In the meantime, Companies House released its 2017/18 Business Plan and a press release covering 4MLD implementation and suggesting the key changes that we note above will come into effect from 26 June. However, BEIS has yet to confirm the details for implementation or release feedback on its consultation.