The Small Business, Enterprise and Employment Act 2015 (the Act) received Royal Assent on 26 March 2015. Whilst the implementation of Parts 7 and 8 of the Act (being those parts of the Act that deal with the corporate aspects and changes to the Companies Act 2006) is to be phased in over the course of this year, the biggest change that will impact on companies and LLPs comes into force on 6 April 2016. This imposes an obligation on all UK companies that are not exempt, and on UK LLPs, to keep a register of people with significant control (PSC register).
Our fifth SBEEA Alert, circulated in January 2016, attached a briefing on the PSC register regime which was prepared on the basis of draft government guidance. That guidance has now been finalised and republished. This sixth in our series of SBEEA Alerts highlights some of the changes to the final form guidance and attaches a slightly updated version of our briefing, click here. The most significant changes are highlighted below.
To review our SBEEA bulletin which sets out the implementation timetable, click here.
Where can the final versions of the Guidance on the PSC regime be found?
To access the final non-statutory guidance (version 6 published on 22 February) which sets out what companies and LLPs must do to identify and register PSCs (PSC Guidance), click here. Note that BIS have confirmed to us that whilst the PSC Guidance is 'final' in the sense that they now expect companies to be able to use it and rely on it (whereas previously it had been published in draft with caveats), they intend to update it on an ongoing basis so as to make it as helpful as possible. BIS will therefore continue to welcome suggestions to improve it.
To access the statutory guidance which has been laid before Parliament and which explains the meaning of 'significant influence or control' (SIOC) for companies (SIOC Guidance), click here.
To access the statutory guidance which has been laid before Parliament and which explains the meaning of 'significant influence or control' (SIOC) for LLPs, click here.
Key changes in the updated PSC Guidance
The updated PSC Guidance:
1. Includes example notices for a company to use in relation to its PSC Register. The PSC Guidance confirms that such notices must be dated and signed by a director or company secretary and advises companies and LLPs keep a record of the notices that have been sent.
2. Has been amended to make it clear that treasury shares should be included when calculating shareholdings but not when calculating voting rights. Earlier drafts of the guidance on PSC condition 1 (directly or indirectly holding more than 25% of the shares) had stated that shares which had been bought back and were being held in treasury should not be included in the calculation of shareholdings - this wording has now been deleted1. Note that the guidance on PSC condition 2 (directly or indirectly holding more than 25% of the voting rights) now includes confirmation2 that voting rights attached to shares that have been bought back and held in treasury should not be included in the calculations of voting rights. Our briefing has been updated to reflect this change.
3. Includes additional guidance3 for companies without share capital (including charitable companies) as to how to apply PSC condition 1 (directly or indirectly holding more than 25% of the shares) applies.
4. Confirms that, where restrictions are imposed on the shares under the PSC regime, no rights can be exercised in relation to, nor derived from, any shares where a restriction is in place until the restriction is lifted. It also notes that it would be good practice for companies to document any reasons for a decision not to impose restrictions.
There have been a number of other clarifications and changes made in the updated PSC Guidance. These include confirmation that:
5. Whilst those companies that are exempt from maintaining a PSC Register (such as DTR 5 issuers) will not be required to identify and register their PSCs, they may still be required to disclose their ownership or control of companies, SEs or LLPs which have to identify and register PSCs themselves - i.e. because those otherwise exempt companies are a registrable "relevant legal entity" (RLE).
6. Even where a company has imposed restrictions on shares under the PSC regime, it should continue to take reasonable steps until it has identified all PSCs and registrable RLEs, or there is nothing more the company can do.
7. Where information on a company's PSC register changes, even if the company cannot immediately enter new information (e.g. it has not been confirmed), the PSC register should be updated to show the date from which the old information may no longer be correct. In addition, the company should include a statement on the status of the company's new investigations.
Amendment to the legislation
In our client briefing we flagged that there was an error in the drafting of new section 790C of the Companies Act 2006 (due to come into force on 6 April 2016). As currently drafted, if there is a legal entity in the chain that is not an RLE (e.g. it is an overseas company which does not keep a PSC register) and there are a number of RLEs higher up the chain, the legislation would have required the company to register all of those RLEs in its PSC register rather than just the first RLE in the chain above it. This had not been the government's intention and the Companies Act 2006 (Amendment of Part 21A) Regulations 2016 correcting this error have now been published. The amendment will allow the company to record only the first RLE in its PSC register in these circumstances so as to avoid duplication of entries.