On 6 April 2016 Part 21A and Schedule 1A to the Companies Act 2006 (“CA 2006”) came into force. Every company and LLP falling within the scope of those sections is now required to keep a register of people with significant control (“PSC”) over that company, known as a PSC register. As this requirement applies to all UK companies and LLPs (with limited exceptions), and due to the penalties that could be issued for non-compliance, it is important for officers to be aware of their obligations.
The primary reason for the introduction of PSC registers was to increase the transparency surrounding the ownership of UK companies, through the disclosure of information about the ultimate owners and controllers of such companies.
In order to satisfy the requirements, companies must:
(1) Identify the PSC(s) (or RLE) of the company;
(2) Record this information in the company’s own PSC register (kept with the company register at the company’s registered office) within 14 days;
(3) Deliver this information to Companies House within a further 14 days;
(4) Record any changes in the PSC register and at Companies House as they occur; and
(5) File a Confirmation Statement with Companies House every year, to confirm that the information recorded is correct.
Although this article refers primarily to companies, it should be noted that the rules apply largely in the same way to LLPs.
Identifying a PSC- Individual PSC
A PSC is an individual who meets one or more of the following five conditions:
He or she directly or indirectly holds:
(1) More than 25% of the shares in the company;
(2) More than 25% of the voting rights in the company;
(3) The right to appoint or remove a majority of the board of directors;
Or less commonly, he or she has the right to exercise, or actually exercises:
(4) Significant influence or control over the company; or
(5) Significant influence or control over the activities of a trust or a firm, where the trustees or the members meet any of conditions 1-4.
In the following example, Shareholder 1 and Shareholder 2 meet condition 1. If all shares in the company hold one vote each then they will also satisfy condition 2. Shareholder 3 does not meet either of these conditions. However if Shareholder 3, despite his minority shareholding, has the right to exercise, or does exercise, significant influence or control over the company he too would be a PSC.
Identifying a PSC- Corporate PSC
It is often the case that a corporate shareholder is the PSC of a company. In this case the corporate shareholder would be known as a ‘relevant legal entity’ (“RLE”), and must be dealt with in largely the same way as an individual PSC.
A corporate shareholder can only be classed as a RLE if it meets one of the same criteria for individuals (as listed above, conditions 1-5) and if that entity itself is required to keep its own PSC register. If not, the subsidiary company will need to look further up the ownership chain to identify any registrable PSC or RLE. Otherwise, there is no need to go any further up the ownership chain. In the below example, UK Company A is the only RLE for UK Company B. Shareholders 1 and 2 would only need to be included on UK Company A’s PSC register.
No registrable PSC
There will be instances where a company does not have a PSC or RLE. This may be the case, for example, where there are multiple shareholders each holding less than 25% of the shares, with each share holding one vote each (see diagram below). The company will still need to maintain a PSC register (i.e. to record that there are no registrable PSCs) and must file this information with Companies House. The register must not be left blank.
Recording the Information
On its own PSC register the company should record the name, date of birth, nationality, residential address, service address, the date of entry on the register, and the conditions which apply (i.e. why he/she is a PSC) for the PSC. For a RLE this should be substituted as appropriate with the registration number and the registered office.
This same information should be provided to Companies House, using either form PSC01 or via Companies House Webfiling. With the exception of residential addresses, this information will be publicly available via the Companies House website.
Penalties for non-compliance
Over 97% of active companies have complied with the requirements, although almost 100,000 companies still have not. Although government guidance states that failure to provide information may result in a fine and even a prison sentence of up to two years, the primary concern at the moment is compliance and no fines have been issued to date. As time goes on, however, and the regime becomes more familiar, it is likely that the government will become more stringent in the issuing of penalties.
Confirmation Statement (CS01)
From 30 June 2016 section 583A of the CA 2006 removed the requirement for a company to deliver an annual return to Companies House, and replaced it with a requirement to deliver a statement confirming the accuracy of the information on the register. This statement is known as a Confirmation Statement. This applies to LLPs in the same way.
Information that must be recorded in a Confirmation Statement includes:
- A change of registered office;
- Changes in the directors or company secretary;
- Changes in the PSC;
- Any change in the company’s principal business activities;
- a statement of capital (where applicable), unless there has been no change since the last statement of capital was delivered to Companies House.