From 6 April 2016 the vast majority of UK companies, even the smallest companies owned by a single person, must keep a Register of People with Significant Control (also known as a “PSC Register”). This register, sits alongside the other registers that a company keeps, and must list and give details of individuals or companies that have significant control over them.
In a similar way to other registers, the PSC Register is available for public inspection. Most of the information included in the register will have to be filed with Companies House.
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What must a company affected do?
In another article we look at the process a company should follow to identify PSCs and put together the PSC register, but broadly a company is required to:
- Take reasonable steps to identify whether there are people with significant control over the company
- Contact those people, or others who may know them, to confirm whether they meet one or more of a number of specific control conditions.
- If they do, get them to confirm relevant information to include in the PSC register
- Create the Register of People with Significant Control and input the details received from PSCs (and, in various circumstances, certain other specified information)
- Confirm the information in the company’s next Confirmation Statement
- Keep the information for existing PSCs up to date and update the register when there is a new PSC or someone ceases to meet any of the control conditions
Why was this introduced?
At the 2013 G8 Summit, it was agreed that there was a need to enhance corporate transparency. In particular, it was felt that complex corporate ownership structures – often with long chains of ownership – make it hard to tell who owns and controls many companies.
In the UK, the introduction of the Register of People with Significant Control was contained as part of the Small Business Enterprise and Employment Act 2015. The PSC Register looks to ensure that those who ultimately own or control a UK company, along with the nature of that control, can be identified. Designed to “look through” complex arrangements involving foreign companies and trusts to the underlying owners, the aim is to create greater transparency, fight financial crime and improve trust in UK companies.
Who does it apply to?
Despite the policy aim being to target such complex ownership structures, the rules affect just about all UK private companies and, by the Government’s own estimates, cost UK business £85.9 million each year. While not an exhaustive list, a PSC register will be required by:
- Private companies limited by shares
- Private companies limited by guarantee
- Most public limited companies
- Limited liability partnerships (LLPs)
- Unlimited companies
- Societates Europaeae (SEs)
Companies formed before the effective date of 6 April 2016 are affected, as are all new companies. Even if your company remains dormant, you will still need to maintain a Register of People with Significant Control.
The requirement to maintain a PSC register does not apply to:
- Sole traders
- Limited partnerships (LPs)
- Charitable Incorporated Organisations (CIOs)
- Companies that are subject to Chapter 5 of the Financial Conduct Authority’s Disclosure and Transparency Rules
- Companies with voting shares admitted to trading on a regulated market in the UK
- Companies with voting shares admitted to trading in another European Economic Area state
- Companies with voting shares admitted to trading on certain specified markets in Switzerland, the USA, Japan and Israel
- Overseas entities operating but not registered as a company in the UK
What is a Person with Significant Control?
Most broadly, a person with significant control (a PSC) is someone who substantially owns or controls a company. More specifically, someone will usually be a PSC if they meet one or more of the following 5 conditions:
- They own more than 25% of the company’s shares
- They hold more than 25% of the company’s voting rights
- They have the power to appoint or remove a majority of the company’s board
- They have the right to exercise or actually exercise significant influence or control over the company (there is detailed statutory guidance explaining the scope of “significant influence or control”)
- They have the right to exercise or actually exercise significant influence or control over a trust or a firm that is not a legal entity which itself satisfies any of the first four conditions.
Different conditions, although based on much the same principles, apply to LLPs. For companies limited by guarantee, which generally do not have shares, the same rules also apply in a slightly amended form.
Who needs to be entered in the Register of People with Significant Control?
With just a few specific exceptions, only individual people can be PSCs. Any individual who is identified as meeting one or more of the above conditions – whether directly or indirectly – must be entered on the PSC Register, albeit only after they have confirmed their details. In another article, we explore who should be included as a PSC.
While legal entities like companies are not classed as PSCs, they may be classed as relevant legal entities (“RLEs”) and need to have their details recorded in the company’s PSC register. A legal entity will generally be classed as an RLE if it would meet any of the above conditions if it was an individual.
In other articles, we look at the information that needs to be included in the PSC register for both individual PSCs and relevant legal entities and explore the requirements where there are complex chains of ownership.
All companies are required to maintain up to date company records. Inform Direct is the perfect tool to help you easily keep everything up to date.