New Rules for UK Companies

UK Companies, limited liability partnerships and Societates Europaeae will, from 6 April 2016, be required by law to identify and maintain a register of all individuals that own or control them. The register is known as a “PSC Register” (Person of Significant Control) and a failure to comply with this new regime is a criminal offence, which may result in a fine and / or custodial sentence of up to two years.

The purpose of the PSC Register is to try to increase transparency over the ownership and control of UK businesses to help address tax evasion, money laundering and the abuse of corporate structures. It will also help investors better understand a business that they are considering investing in.

The PSC Register

In broad terms, an officer of a company is required to: (i) investigate and identify any persons with significant control over the company; (ii) confirm with any such person the relevant information required for the PSC Register; (iii) record that person’s details on the company’s PSC Register; (iv) provide this information to Companies House in the annual Confirmation Statement (which replaces the Annual Return); and (v) keep the PSC Register up to date, and update Companies House annually in the Confirmation Statement.

An individual has significant control over a company (and is therefore a “PSC” and must have their details recorded in the PSC Register) if one or more of the following five conditions are met:

1. They directly or indirectly hold more than 25% of the shares in the company;
2. They directly or indirectly hold more than 25% of the voting rights in the company;
3. They hold the right to appoint or remove the majority of the directors of the company;
4. They have the right to exercise, or actually exercise, “significant influence or control” over the company; or
5. They have the right to exercise, or actually exercise, “significant influence or control” over the activities of a trust or firm (where that trust or firm would satisfy one of the above four conditions).

It should be noted that the first of these three conditions might be met directly or indirectly, and consideration should be given as to whether an individual might hold their shares or rights through another company, for example.

In order to comply with the deadline of 6 April, companies should take immediate steps to identify any persons with significant control and ensure that their details are recorded in a PSC Register. The details that must be recorded in the register include the PSC’s name, date of birth, nationality, country or state / part of the UK of residence, service address, usual residential address (which does not appear on any public register), the date they became a PSC and information about how they have significant control of the company.

The PSC Register should never be empty. If a company has failed to obtain the necessary information about PSCs by 6 April, it must insert the following statement into its PSC Register: “The company has not yet completed taking reasonable steps to find out if there is anyone who is a registrable person or a registrable relevant legal entity in relation to the company”. Where a company considers itself not to have any PSCs, it still has to maintain a PSC Register and should record the following statement: “The company knows or has reasonable cause to believe that there is no registrable person or registrable relevant legal entity in relation to the company”.

Richard Tomlinson, Corporate Partner at Chattertons Solicitors said “I strongly advise all companies and their directors and shareholders to review the requirements of the new PSC Register regime in detail and start to collate necessary information on their ‘persons of significant control’ as a matter of urgency to enable them to comply with the 6 April deadline”.

Richard Tomlinson joined Chattertons Solicitors in March 2016 as a Partner specialising in company commercial and corporate law. He works closely with his clients to develop a true understanding of their business and aspirations enabling him to provide informed and bespoke advice to each individual client. Richard can be contacted by email on Richard.Tomlinson@Chattertons.com or on direct line 01775 765350.