Earlier this year the government announced its intention to create a new central registry of company beneficial ownership information.

In October 2014, BIS published a second discussion paper seeking views on the central register of people with significant control over UK companies (the “PSC Register”) contained in the Small Business, Enterprise and Employment Bill, which has just gone through the House of Commons committee stage.

These proposed new requirements will have implications for millions of UK companies and individuals and failure to comply could result in criminal sanctions. We set out below the key elements of the proposal and how you can have your say.

Before doing so we note the reason (apparently) for this new and extremely complex set of rules is to ensure full information on ultimate beneficial ownership is a matter of public record. It is hoped this will stop the money laundering which takes place here. Will it work? Somehow we doubt it.  Will it add a huge amount of red tape to (and costs for) millions of SMEs for which this is in reality, a complete waste of time and effort? We suspect it will.

Who will have to register?

The proposed test for significant control is based on the existing definition for beneficial ownership applied in the anti-money laundering context. There are five conditions that constitute significant control:

  1. Direct or indirect ownership of more than 25% of a company’s shares;
  2. Direct or indirect control of more than 25% of a company’s voting rights;
  3. Direct or indirect right to appoint or remove a majority of the board of directors of a company;
  4. Exercise or right to exercise significant influence or control over a company; and/or
  5. Exercise or right to exercise significant influence or control over the activities of a trust or firm which itself meets one or more of the first four conditions.
  6. name;
  7. service address;
  8. country or state of usual residency;
  9. nationality;
  10. date of birth;
  11. usual residential address;
  12. date on which the individual became a registrable person in relation to the company in question; and
  13. the nature of his or her control.
  14. Email to transparencyandtrust@bis.gsi.gov.uk marked as a response to the PSC register discussion paper; or
  15. Hard copy to: Transparency and Trust, Corporate Law Reform Team, Department for Business, Innovation and Skills, Spur 1 , 3rd Floor, 1 Victoria Street London SW1H 0ET.

Unfortunately, it is not clear at this stage what is meant by “significant influence or control”. The BIS guidance states that the phrasing is deliberately wide and that the SBEE Bill requires guidance to be produced by the Secretary of State and laid before Parliament. Nonetheless, it is clear that this test is designed to catch a very large number of people and will impose considerable additional requirements on companies and investors in terms of ensuring that they keep the register up to date.

The guidance states that a failure to provide information will result in criminal penalties for companies and individuals.

What information will be recorded on the register?

It is proposed that any individuals who are required to be registered will have to supply:

All of this information will be made available publicly except for the residential address and the full date of birth of the individual. These will only be available to specified public authorities and credit reference agencies. The current list of such bodies can be found at annex 1 to the guidance. In a similar way to directors, there will also be provision for suppression of data of PSCs at serious risk of harm for example companies involved in controversial sectors, where there is increased risk of asset stripping or kidnap, where the individual has religious or political affiliations likely to put them at serious risk of harm or where disclosing a company’s beneficial owners would distort market forces and affect fair competition.

Have your say

BIS are seeking views on a range of different aspects, which include:

  • What should be included in the guidance to be produced on the meaning of 'significant influence or control', in particular the structure, format and content of the guidance, and whether an external working group would be a good way to develop it.
  • Whether wider, non-statutory guidance is required, for example on the other conditions of being a person with significant control, and the way in which the information must be obtained and held.
  • The way in which the control over a company is recorded on the register, in particular the information required and how it should be recorded.
  • The way in which some data should be protected from public disclosure, including the factors to be taken into consideration when deciding whether someone is eligible for protection, the particulars to be protected, who should be able to make an application and the evidence required to support it.