The Small Business, Enterprise and Employment Act 2015 (SBEE) materially reforms UK company law. Key corporate aspects are expected to be fully implemented by April 2016. A consultation paper published this week by the UK Government (the Consultation) confirms the timing of the implementation of certain of those key provisions, provides additional clarity on a number of areas and includes draft regulations, The Register of People with Significant Control Regulations 2015 (the PSC Regulation).
Register of individuals with significant control
SBEE introduces a central public register of individuals with significant control of UK companies (known as the PSC register). The majority of UK companies will be obliged to compile a PSC register, details of which will populate a central public register on an annual basis. A request can also be made to inspect the register at any time, by anyone with a “proper purpose”. SBEE already exempts listed companies from this requirement. The Consultation proposes to also exempt UK companies listed on regulated markets in other EEA states.
SBEE sets out the interests and the details which will be required to be included on the PSC register. Broadly SBEE requires details of those individuals (known as PSCs), who ultimately own or control more than 25 per cent of a UK company’s shares or voting rights, or who otherwise exercise significant influence or control over the company or its management (guidance on which is expected to be published in the autumn), to be included on the register.
The Consultation confirms the provisional implementation dates for the PSC provisions. Companies will need to compile a PSC register in January 2016 and make the information available to the public from April 2016. It also confirms that LLPs will be required to hold a PSC register from January 2016. In addition, the Consultation confirms that changes required to conform the UK’s PSC regime to the EU’s Fourth Money Laundering Directive, will not be implemented until 2017, the year the directive must be transposed into UK law.
The draft PSC Regulation sets out certain details, in addition to those already detailed in SBEE, of the content of the PSC register, identification of PSCs and inspection of the register. It proposes:
- that the nature of control be recorded on the register by stating which of the tests for being a PSC have been met and whether the percentage of shares or voting rights held by the PSC is within one of three broad bands (more than 25 per cent up to 50 per cent; more than 50 per cent up to 75 per cent; or 75 per cent or more). If introduced as proposed, maintenance of the register in this regard will be fairly simple, with no requirement to state the precise percentage of control;
- that certain statements be recorded in the register either where the company does not have a PSC or has been unable to verify its PSCs (a PSC can only be recorded on the register when the company has all of the required information). A “picklist” of options will address variations such as where the company has issued a formal request for information from an individual, or where it has placed restrictions on shares where a person has not complied with a request for information;
- one of two options for charging for inspection of the company’s register. The consultation advocates a flat fee of £12 for inspection but provides a sliding scale option for consultation of up to £91, plus the company’s reasonable costs, depending on the number of entries;
- details of the protection regime enabling residential addresses of PSCs to be withheld from disclosure to credit reference agencies where the person can demonstrate that disclosure would put them at serious risk of violence or intimidation due to the activities of the company. The PSC Regulation also sets out the possible grounds for a PSC to apply to Companies House to stop any of their PSC information from appearing on the public register or being disclosed, where the person can demonstrate that disclosure would put them at serious risk of violence or intimidation due to the activities of the company. Transitional provisions will enable PSCs to apply for this protection before April; and
- details of the procedures the company can employ when, in the course of seeking to identify its PSCs, it needs to compel the production of information.
Abolition of corporate directors
Since 2008, all UK companies have been required to have a director who is a natural person (prior to that all directors could be corporate or other legal entities). SBEE will require all directors to be natural persons subject to certain exemptions. Existing directors who are not natural persons will automatically cease to be directors 12 months after the provision is in force. Potential exceptions to the ban on corporate directors have yet to be finalised. The Consultation confirms that the initial implementation date of October 2015 for this provision is postponed to April 2016.
Impact – it is not yet clear how all of the PSC provisions will be implemented. As mentioned above, guidance on whether an individual exercises significant influence or control is not expected to be published until the autumn, making it difficult to consider SBEE’s impact on group structures. However, now timing of implementation of the provisions has been confirmed, including its application to LLPs, those entities within scope and their members may wish to start considering whether they have, or are, an individual who is deemed to exercise significant influence or control.