Get ready for the new PSC regime
22nd February, 2016
Companies need to start taking steps now for important changes to the information which they have to record and disclose about their businesses.
This will be the biggest change in company filing requirements for many years.
What is changing?
Changes to the Companies Act 2006 require all unlisted UK companies to do the following:
- Take reasonable steps to identify People with Significant Control over them (PSCs);
- Maintain a new statutory register of Persons with Significant Control (a PSC register); and
- File information at Companies House about Persons with Significant Control.
When do the changes happen?
The requirement to keep the PSC register applies from 6 April 2016, and so companies should start taking steps now to ensure that they are in a position to comply with effect from this date.
From 30 June 2016 onwards, companies will have to file information about their PSCs at Companies House. This filing process will be done as part of the new “Confirmation Statement” that will replace the Annual Return.
What is a “Person with Significant Control”?
A PSC is an individual who meets one or more of the following conditions in relation to a company:
- Directly or indirectly holds more than 25% of the shares;
- Directly or indirectly holds more than 25% of the voting rights;
- Directly or indirectly holds the right to appoint or remove a majority of directors;
- Otherwise has the right to exercise, or actually exercises, significant influence or control (statutory guidance has recently been issued as to what this means); and/or
- 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, if that trust or firm would itself satisfy any of the first four conditions if it were an individual.
Which companies does the new regime apply to?
The regime applies to all UK incorporated companies limited by shares, companies limited by guarantee and unlimited companies, except companies whose voting shares are admitted to trading to a regulated market in the UK (such as the LSE Official List or AIM), and certain overseas markets. The new rules do, however, apply to UK subsidiaries of such listed companies.
What about group companies?
The new rules also apply to legal entities that own and control companies, such as holding companies.
A legal entity must be entered in the PSC register of a company if:
- it meets any of the conditions described above in relation to that company, and
- it is subject to its own disclosure regime.
This latter condition would be satisfied, for example, by any UK company that has its own PSC register, or is listed on a regulated market in the UK or certain overseas regulated markets. The legislation describes such entities as registerable Relevant Legal Entities (or RLEs).
Specific rules apply where there is a group with more than two tiers of holding and subsidiary companies, and to groups that include foreign-owned companies.
How do you identify people with significant control?
The law requires companies to take reasonable steps to find out if there are any people that have significant control over them.
You should consider all of the documents and information available to you, such as the registers of members, directors, articles of association, and any shareholders’ agreements.
You should also consider whether there is any evidence of any shareholders voting together in a predetermined way, or of rights or control being ultimately exercised by the same person.
If you don’t have all the information that you need about a PSC or RLE, there is a formal notice procedure for requesting it.
What should I put in the PSC register?
The new rules prescribe what information should be included in the PSC register:
- for individuals, it will include their name, service address, country of residence, date of birth and usual residential address;
- for RLEs, this will include their name, registered office, legal form, the name of the register of companies in which it is entered and registration number; and
- in all instances, the PSC register must contain the date on which they became a registerable person or RLE and the nature of his/its/their control.
A company’s PSC register should never be blank. Government guidance has been issued which gives the official wording to be included in the PSC register in a wide variety of circumstances, such as where the company is still taking steps to identify whether it has any PSCs, or where it believes there to be none.
What are the consequences of not complying?
The new rules create a number of new criminal offences, including failing to maintain a PSC register, and failing to take reasonable steps to identify whether there is anyone with significant control over the company. Such offences can be committed by the company and every officer that is in default.
Because this briefing is only a summary of the new rules, we would recommend that companies take legal advice in order to ensure that they are compliant by the relevant statutory deadline.
How can Ward Hadaway help?
We can provide advice about:
- identifying people with significant control;
- creating and completing the PSC register; and
- what to do if you cannot obtain all the information you need about people with significant control.
We offer fixed price compliance packages as well as company secretarial support services.
For more details, please get in touch.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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