UK incorporated AIM companies are now within scope of the "people with significant control" regime in Part 21A of the Companies Act 2006 (the PSC regime). Under the terms of the implementing statutory instrument they will, from 24 July 2017, be required to collect and keep information about their significant controllers and to file that information at Companies House.
The UK introduced its PSC regime for most UK incorporated companies in April 2016 to promote corporate transparency and to deter the abuse of UK companies (e.g. as vehicles for money laundering). AIM traded companies were excluded on the basis that they, like their Main Market counterparts, were already subject to the disclosure regime in Disclosure and Transparency Rule 5 (DTR 5).
However, from 26 June 2017, the UK must comply with the EU's Fourth Anti-Money Laundering Directive, which introduces a regime for the disclosure of significant controller information across all EU and EEA countries. While the UK's existing domestic PSC regime is broadly compliant with this Directive, some changes have been necessary, including extending the scope of the regime to include AIM traded companies (notwithstanding that they are already and remain, for the time being at least, subject to DTR 5).
Because of the UK general election, the previously unpublished implementing statutory instrument was only laid before Parliament on 23 June and comes into force on 26 June as required by the Directive.
Key features of the PSC regime
From 24 July 2017, a UK incorporated AIM company will have to keep a new statutory register, a register of people with significant control (PSC register).
The company will be required to take reasonable steps to identify and then include on its PSC register any individuals and relevant legal entities (see below) who meet the significant control test and registrability criteria of the legislation. That information will also have to be filed at Companies House.
Both the company's PSC register and its Companies House filings will have to be updated as and when there are changes.
Significant control test
A person, whether an individual or a legal entity, has significant control if they:
- hold, directly or indirectly, more than 25 per cent of the shares in an AIM company; and/or
- hold, directly or indirectly, more than 25 per cent of the voting rights in an AIM company; and/or
- hold the right, directly or indirectly, to appoint or remove a majority of the board of directors of an AIM company; and/or
- have the right to exercise, or actually exercise, significant influence or control over an AIM company.
Additionally (and by way of anti-avoidance) significant control also arises where a person has the right to exercise, or actually exercises, significant influence or control over the activities of a trust or firm which is not a legal person, but would satisfy any of the first four tests if it were.
It is entirely possible for there to be no person with significant control over a particular company. Conversely, there may be multiple people with significant control.
Inclusion on the PSC register
Individuals who meet any condition of the significant control test will be registrable unless they only hold an interest in the AIM company through having significant control over a relevant legal entity.
A relevant legal entity is a legal entity which itself meets at least one of the conditions for significant control described above in relation to the AIM company and is also subject to the UK PSC regime (or has voting shares admitted to trading on an EU regulated market or certain other specified overseas markets). A relevant legal entity is itself registrable unless it only holds an interest in the company through having significant control of another relevant legal entity.
X, an individual, directly owns 26 per cent of the shares in a UK incorporated AIM company. X will be a registrable PSC on that company's PSC register.
X owns 100 per cent of the shares in Y Ltd, a UK private company, which in turn owns 26 per cent of the shares of a UK incorporated AIM company. Y Ltd is a relevant legal entity as it meets the significant control test in relation to the AIM company and is itself subject to the PSC regime. The interposition of Y Ltd between X and the AIM company means that, in this case, X will not be a registrable PSC in the AIM company's PSC register. However, in this situation Y Ltd is registrable in the AIM company's PSC register as it meets the test for being a registrable relevant legal entity. Those looking at the AIM company's PSC register will be able to identify Y Ltd. By then examining Y Ltd's PSC register, they will be able to identify X, who is a registrable PSC in relation to Y Ltd.
X owns 100 per cent of a privately held Chinese company, which in turn owns 26 per cent of the shares of a UK incorporated AIM company. Although it has significant control in relation to the AIM company, the Chinese company cannot be a relevant legal entity as it is not subject to the UK PSC regime and does not have voting shares admitted to a designated market. X will therefore be a registrable PSC on the AIM company's PSC register.
The basic framework outlined above is the subject of considerable detail in the legislation, including as to the steps which companies must take to ascertain whether they have any registrable PSCs or relevant legal entities, the particulars which they must include in their PSC register, the information to be filed at Companies House and the time limits which apply. There are also many detailed interpretive and anti-avoidance provisions.
If they are not already doing so, UK incorporated AIM companies should be liaising with their share registrars and advisers to ensure that they are in a position to comply with the PSC regime from 24 July 2017.
While these UK rules do not apply to overseas incorporated AIM companies, those companies incorporated in another EU or EEA jurisdiction should take advice on how the Fourth Anti-Money Laundering Directive is being implemented in their country of incorporation.