The Fourth European Anti-Money Laundering Directive (“MLD4”) came into force in the UK last week. MLD4 has various implications, but one of particular note for the UK asset management community is the extension of the “People with Significant Control”, or “PSC”, Regime to Scottish Limited Partnerships (“SLPs”).

It is important that any sponsors using SLPs, or intending to use SLPs in new fund structures, read on as under the new rules, mandatory filings will need to be made at Companies House in the next month.

By way of refresher, the PSC Regime came into force in the UK in April 2016 (with positive obligations arising with effect from June 2016). As originally enacted, it only applied to UK limited companies and UK LLPs (it did not, and still does not, apply to English limited partnerships). The PSC Regime was driven by a policy focus on corporate transparency and required that all companies and LLPs maintain a register of persons with significant control over them.

In the context of SLPs, “PSCs” are generally defined as persons holding the right to:

  • more than 25% of the SLP’s surplus assets on winding up;
  • more than 25% of the SLP’s voting rights;
  • appoint or remove the majority of the persons who are entitled to take part in the management of the SLP; or
  • exercise, or actually exercising, significant influence or control over the SLP.

In the context of funds structured as SLPs, it is expected that the PSC test will capture at least general partners, managers/operators and limited partners holding at least 25% of interests in the fund.

SLPs are required to deliver information to Companies House identifying their PSCs. SLPs in existence before 24 July 2017 are required to deliver their PSC register to Companies House by 7 August 2017. Failure to comply is an offence.

It is important to note that, because of the way the PSC criteria are drafted, in drawing up the PSC register for an SLP, one may have to look through legal constructs to identify, publically, any PSC(s) that may themselves be the ultimate beneficial owners or controllers of limited partners of the SLP (and may not therefore otherwise be identifiable based on a review of Companies House filings). 

In order to complete the filings in a timely manner, sponsors should waste no time in analysing their UK fund structures featuring SLPs, in order to identify and collate the various pieces of information relating to the relevant PSCs that need to be filed. At minimum, this will likely require an analysis of the relevant partnership agreement and reference to the limited guidance available.

Going forward, there will be ongoing obligations on SLPs:

  • to notify changes to their PSCs to Companies House within 14 days of such changes occurring; and
  • to deliver an annual confirmation statement to Companies House, confirming the identity of the PSCs.

It should be noted that the foregoing summary is merely one aspect of the newly amended PSC Regime. Other changes recently introduced include a tightening of the requirements of the PSC Regime applicable to UK companies and LLPs, as well as companies listed on AIM, but the focus of this alert is the extension of the regime to SLPs.