The Scottish Partnerships (Register of People with Significant Control) Regulations 2017 came in to force on 26 June 2017.
These Regulations make eligible Scottish partnerships subject to the PSC regime, which has applied to most UK companies since April 2016.
We reported earlier this year that there was a desire amongst many for increased transparency regarding limited partnerships in the UK, in particular Scottish limited partnerships. The obligations on eligible Scottish partnerships (which include all Scottish limited partnerships) under the Regulations should help to address some of the concerns highlighted earlier this year.
Which Scottish partnerships are affected?
As referred to above, the Regulations apply to 'eligible' Scottish partnerships. Those are:
- all Scottish limited partnerships; and
- broadly, Scottish general partnerships where all members are corporate bodies (referred to as 'Scottish qualifying partnerships' in the Regulations).
When do the new requirements apply?
Each eligible Scottish partnership has a duty to investigate and obtain information on its persons with significant control. This applies now. The partnership must take reasonable steps to find out if any person is a registrable person or registrable relevant legal entity (RLE) and, if so, identify them.
The critical date for eligible Scottish partnerships is 24 July 2017.
Within the period of 14 days, beginning with 24 July 2017:
- existing Scottish qualifying partnerships must register at Companies House; and
- all eligible Scottish partnerships must submit PSC information to Companies House either to identify their PSCs, to identify the status of their investigations in relation to their PSCs, or to confirm that they do not have any PSCs.
An individual or RLE with 'significant control' is someone who meets one or more of the specified conditions, which are:
- holding, directly or indirectly, the right to more than 25% of any surplus assets on a winding up - If the right to any surplus assets on winding up is not expressly provided for (for example in a partnership agreement) then each partner is treated as holding an equal share
- holding, directly or indirectly, more than 25% of the voting rights - Where the entity does not have general meetings (i.e. is not a company with members) then voting rights are decided by the exercise of voting rights that are (i) equivalent to those of a person entitled to exercise voting rights in a company or (ii) exercising the right under the constitution of the entity to block changes to the overall policy of the entity or to the terms of its constitution
- holding, directly or indirectly, the right to appoint or remove the majority of the persons who are entitled to take part in the management - This includes the right to appoint or remove those persons who hold a majority of the voting rights at meetings of the management body of the partnership
- having the right to exercise, or actually exercising, significant influence or control over the partnership
- where trustees of a trust or members of a firm that is not a legal person meet any of the above specified conditions, or would if they were individuals, having the right to exercise, or actually exercising, significant influence or control over that trust or firm
For existing eligible Scottish partnerships, once they have identified any person or RLE that should be registered as a PSC at Companies House, they must submit required information, initially, within the period of 14 days beginning with 24 July 2017 or, if later, within 14 days of receipt of that information. In the case of an individual PSC, that information must have been 'confirmed'. Going forward, similar 14 day requirements apply in respect of a 'relevant change' in PSCs. A relevant change occurs if (1) the person ceases to be a registrable person in relation to the partnership or (2) any other change occurs as a result of which the particulars stated for the registrable person in the register are incorrect or incomplete.
Another key point to note (which differs from the PSC regime as it applies to companies) is that eligible Scottish partnerships are not required to maintain their own PSC registers. The obligation is to notify Companies House, as the Registrar of Companies for Scotland maintains the register.
Eligible Scottish partnerships will also, in a similar way to UK companies, be required to submit an annual confirmation statement. This must be submitted annually within 14 days of each 'review period'. Each review period is a total of 12 months. For existing Scottish limited partnerships, the review period will commence on 24 July 2017. For existing Scottish qualifying partnerships, the review period will commence on the date of registration at Companies House in accordance with the Regulations. For eligible Scottish partnerships formed after 24 July 2017, the review period will begin on the date of registration.
While many will be pleased with the increased transparency of Scottish partnerships brought about by the Regulations, those who are partners of or administer eligible Scottish partnerships should be aware of the additional administrative requirements going forward. Failure to comply with the PSC regime requirements can result in criminal liability for the partnership, its partners and managers.
For groups which contain Scottish limited partnerships or Scottish general partnerships, current PSC registers might also now need updating to reflect that such partnerships will be capable of being shown in the registers as RLEs. Previously, as they were not subject to their own disclosure requirements, it was necessary to 'look through' them. Existing PSC registers may therefore also need to be updated urgently to comply with the change in law.