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Martin Varley Partner Humphries Kirk Solicitors

Persons with Significant Control Registration

| Published on March 15, 2016

Persons with Significant Control registration obligations, sanctions and penalties

From 6 April 2016 all unlisted companies and LLPs must take steps to identify its ultimate owners.

There is NO EXEMPTION for small businesses.

High net worth individuals are likely to be affected.

Persons with significant control of a company or LLP (PSCs) must give information so that the company/LLP can keep a Register of PSCs. This information will be available on the public register at Companies House.

New criminal penalties apply to the company, its directors and secretary, and PSCs, if they do not comply.

Sanctions can be imposed on PSCs who do not comply with their disclosure obligations without the company having to go to court.  These include loss of dividend, voting and transfer rights.

Reporting requirements will affect anyone who has ownership interests in companies and LLPs.

What are a company’s obligations?

UK registered companies and LLPs must take reasonable steps to establish who are Persons with Significant Control (PSCs).  The company may send a notice to any person the directors reasonably believe should be recorded in the Company PSC Register.

If a company fails to take reasonable steps to identify PSCs, both it and any officer in default will have committed a criminal offence, punishable by an unlimited fine and/or up to two years’ imprisonment.

If the company has confirmed all the information that needs to be shown on the Company PSC Register, no notice need to be sent.

If it is reasonable for the directors to believe that a person knows the identity of someone who should be on the Company PSC Register, or has information from which the identity of a PSC can be established, a notice may be sent to that person.

What if information is not provided?

The company will be entitled to stop paying dividends and to refuse to register transfers of shares until information has been provided.

Anyone who fails to give information properly requested will be guilty of a criminal offence. Again, the punishment is an unlimited fine and/or up to two years’ imprisonment.

What are the PSC Registers?

Companies must and LLPs must take steps to create their own PSC register from 6 April 2016. From June 2016 they will have to give this information to Companies House when they deliver their ‘Annual Confirmation Statement’ which replaces the Annual Return.

The Company Register will contain data on PSCs, including certain personal details (such as name, address, nationality, date of birth) as well as information on the nature and extent of their control. This will include what category of control they have as well as an indication of the level of control in the case of the holding of shares or votes.

Companies House will have all PSC information by July 2017, and will make it freely available in one central, searchable public register.  There are therefore two different kinds of register of PSCs:

  • the Central Register, maintained by Companies House; and
  • a Company PSC Register.

The disclosure of the significant shareholders of listed companies is already required under existing Transparency Rules. They are exempt, but their subsidiaries must keep their own PSC Registers.

Who are PSCs?

The PSC requirements identify individuals and entities who ultimately control UK registered companies and LLPs as someone or an entity who:

  • holds, directly or indirectly, more than 25% of the shares;
  • holds, directly or indirectly, more than 25% of the voting rights;
  • holds, directly or indirectly, the right to appoint or remove directors having the majority of the votes that can be cast at a meeting of the board of directors;
  • has the right to exercise, or actually exercises, significant influence or control over the company/LLP;
  • 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 entity and which meets any of the other foregoing conditions.

Who has significant influence or control?

Draft statutory guidance on the meaning of “significant influence or control” suggests that “significant influence” and “control” are alternatives. If a person can direct day-to-day activities, this will be indicative of control. If a person can ensure that particular activities are adopted, this will be indicative of significant influence. Nevertheless, “control” or “significant influence” do not have to be exercised by the PSC with a view to personal gain.

People who do not necessarily have significant influence or control will include directors, professional advisers, lenders, suppliers, customers and employees.

Indirect ownership

Where there are many layers of ownership application of the PSC regime can result in some complexity.  A person is treated as holding a share or right indirectly if it has a ‘majority stake’ in the legal entity that holds the share or right.  That holding can be indirectly through a series of legal entities, each of which has a majority stake in the entity below it and the last of which holds the share or right in the company or LLP.

A ‘majority stake’ arises by:

  • holding a majority of voting rights;
  • being a member and having the right to appoint or remove a majority of the board;
  • being a member and controlling a majority of the voting rights by agreement with other members; or
  • having the right to exercise, or actually exercising, dominant influence or control over the company or LLP.

Where the shares are held by a series of subsidiary UK companies and LLPs only the ultimate holding company needs to be entered in to the Company PSC Register.  The details of any foreign companies must be entered, even though they are not the ultimate holding company, and that the ultimate holding company is registered in the UK.

What to do now?

April 6, 2016 is only days away.  Failure to have prepared a Company PSC Register by that date will constitute a criminal offence.

Directors should already be taking steps to identify the individual and corporate PSCs now.  The Company PSC Register must be in place by 6 April and the information made available to Companies House in June of this year.

If you require any specific or more detailed advice, please contact Martin Varley (m.varley@hklaw.eu) or your usual contact at Humphries Kirk.

 

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