The last Government first trailed its intention to create a central register of information about beneficial ownership and control of UK companies as part of its “Transparency & Trust” reforms announced at the UK hosted G8 summit in June 2013.  This was the opening shot in its campaign to increase trust in UK business, and tackling tax evasion, money laundering and terrorist financing, through, amongst other things, enhanced transparency of company ownership and control.

The proposals have now taken shape and the parts of the implementing legislation (The Small Business, Enterprise and Employment Act 2015) relating to companies’ obligation to create and maintain a register of “people with significant control” (PSC) will come into effect on 1 January 2016.

Obligation to Keep a PSC Register

From 1 January 2016 most UK-incorporated companies will be required to keep a register of PSCs.  PSCs are individuals who (alone or as a joint holder of the share or right in question):

  1. hold, directly or indirectly, more than 25% of the shares or voting rights in the company; or
  2. hold the right, directly or indirectly, to appoint or remove a majority of the board of directors of the company; or
  3. have the right to exercise, or actually exercise, significant influence or control over the company; or
  4. have the right to exercise, or actually exercise, in relation to the trustees of a trust or the members of a firm that is not a legal person who meet one or more of the above conditions in their capacity as such (or would do if they were individuals), significant influence or control over the activities of that trust or firm.

The legislation requires the Department for Business, Innovation and Skills (BIS) to publish guidance on the meaning of “significant influence or control” and it is due to do so in October 2015.

As with registers of members, companies must keep the PSC register open for inspection by the public and, from April 2016, must file the information contained in the PSC register at Companies House.

Companies that are subject to the voting rights disclosure requirements in Chapter 5 of the FCA’s Disclosure Rules and Transparency Rules sourcebook (DTR), such as those admitted to trading on the London Stock Exchange’s Main Market or AIM Market, are not required to keep a PSC register.

Where a company that is required to keep a PSC register or is subject to Chapter 5 of the DTR has significant control over a company, the controlled company (such as a subsidiary) need only identify the immediate controlling company or legal entity rather than the ultimate individual PSC.

Information to be Included in the PSC Register

The PSC register must contain each PSC’s name, service address, country or state of usual residence, nationality, date of birth, usual residential address, the nature of his significant control and the date it was obtained, but a PSC’s particulars must not be included in the register unless they have been provided or confirmed to the company by the individual or with the individual’s knowledge.

A PSC’s usual residential address and the fact that his service address is his usual residential address will be excluded from the information made available for inspection by the company and the public register at Companies House.

BIS may make regulations allowing the suppression of information on the PSC register from public disclosure in certain circumstances.  It has announced that it is minded to limit those able to apply for protection to individuals at serious risk of violence or intimidation arising from the company’s activities.

Obligation to Gather and Provide PSC Information

Companies are under certain information gathering duties in relation to their PSCs.  They must, for example:

  1. take reasonable steps to find out whether there are persons who should be included in their PSC register and, if so, identify them
  2. serve notices on anyone they know or have reasonable cause to believe is a PSC, or knows the identity of a PSC, requiring confirmation by the person and the provision of the particulars to be recorded in the PSC register
  3. require confirmation from PSCs if they know or have reasonable cause to believe that the PSC has ceased to be a PSC or his particulars recorded in the PSC register have changed

Persons who know or ought reasonably to know that they are PSCs in relation to a company must identify themselves to the company and provide the necessary particulars of their interest and any changes in their particulars.

Sanctions

The company and every officer in default commit a criminal offence if the company fails to comply with its various duties in relation to the PSC register, including its information gathering duties (punishable by a fine or, in relation to the information gathering duties, imprisonment).

Persons who fail to comply with their notification obligations or a company’s requests for information commit a criminal offence (punishable by a fine or imprisonment).  In addition, and perhaps of more interest to companies, such failure allows companies to disenfranchise the shares held by the relevant person (without a court order) and to apply to the court for an order that the shares be sold or transferred.

Next Steps

BIS has established a working group to oversee the development of guidance required to support the implementation of the PSC register.  In particular, it must publish statutory guidance on what is meant by “significant influence or control” in the context of the PSC register and anticipates doing so in October 2015.

Companies will need to develop and put in place internal processes and procedures necessary for them to create and maintain their PSC registers.  As there will be little time available between the publication of guidance on the meaning of the “significant influence or control” limb of the definition of a PSC and the obligations in relation to PSC registers coming into effect on 1 January 2016, it makes sense for companies to start reviewing corporate structures and identifying so far as possible potential PSCs now, and for potential PSCs to consider the UK-incorporated companies in relation to which they may be PSCs.

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