In this article, we look at the circumstances when a corporate entity must be included in a PSC register and what details must be obtained and entered in the register. Elsewhere, we look at the process a company should follow to identify its PSCs and RLEs and put together the register.
To be classed as a registrable relevant legal entity (or registrable RLE) – a mouthful, but essentially meaning they must have their details recorded in a company’s PSC register – a corporate entity must meet several conditions:
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Condition A: It would need to have been classed as a person with significant control if it had been an individual. That means it must meet at least one of the following conditions:
- Hold more than 25% of the company’s shares
- Hold more than 25% of the company’s voting rights
- Have the power to appoint or remove a majority of the company’s board
- Have the right to exercise or actually exercise significant influence or control over the company
- 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.
Condition B: It meets certain “transparency” criteria. Specifically, to be an RLE the entity must either:
- Be required to keep its own PSC Register;
- Be subject to the Financial Conduct Authority’s disclosure and transparency regime (a “DTR5 issuer”); or
- Have voting shares admitted to trading on a regulated market in the UK or another EEA state or in a specific named market in the USA, Japan, Switzerland or Israel.
Condition C: It is the first corporate entity in the company’s ownership chain that satisfies both conditions A and B.
Let’s use some examples to see how those conditions play out in practice.
In Example 1, Company A is fully owned by Company B, which is also a UK company subject to the PSC register requirements. As a registrable relevant legal entity, Company B’s details should be listed in Company A’s PSC register. It will be noted as meeting each of control conditions 1, 2 and 3 listed above.
Unless there is someone else who has special rights to appoint or remove a majority of the board, or exerts “significant influence or control”, Company B will be the only person recorded in A’s PSC Register. Because Company B is an RLE which is included, Individual 1 does not need to be included in Company A’s PSC register, despite the fact they exercise ultimate control over it. Individual 1 will, however, be recorded in Company B’s PSC register.
Example 2 illustrates that only companies that meet one of the five control criteria need to be included in the PSC register.
Because it holds 90% of the shares in Company C (and probably therefore also controls 90% of the voting rights and has the ability to appoint a majority of the directors), UK Company E will be treated as a relevant legal entity and must be included in C’s PSC register.
As E is a registrable RLE for Company C, Individual 2 does not count as a PSC for C (although it will be included in Company E’s PSC register).
Despite the fact it holds shares in C, Company D will not appear as a RLE in its PSC register because it doesn’t meet the condition of holding more than 25%. Neither will Individual 1 be included in C’s PSC Register, although they will appear in D’s register.
In Example 3, Company G will be included in F’s PSC register as the first corporate entity in the company’s ownership chain. Because G’s details are listed in F’s PSC register, H won’t appear – despite being a UK company that is itself subject to the transparency requirements, H is not the first relevant corporate entity in F’s ownership chain. While H is a relevant legal entity, it is not also registrable for Company F. This avoids duplicate disclosure.
However, H is the first relevant corporate entity in Company G’s ownership chain, so will be listed in G’s PSC register.
Because a relevant legal entity further down the chain has been included in the PSC register for the other companies, the only PSC register in which Individual 1 will be listed is Company H.
Company I in example 4 is also part of an ownership chain.
Its immediate corporate owner, however, is based in the Seychelles and therefore does not meet the transparency requirements. This company is not a relevant legal entity and will not appear on Company I’s PSC register.
The directors of I will need to look further up the chain of ownership. The next entity in the chain is a Japanese company. While this company won’t keep its own PSC register, isn’t subject to the FCA’s disclosure requirements and isn’t an EEA company, it is listed on a market specified in the legislation – in this case the Tokyo Stock Exchange. This company will therefore be the one included in I’s PSC register.
As a listed company, the Japanese company is likely to have a number of shareholders. Even if there was a majority shareholder, however, that individual will not be included in Company I’s PSC register because the Japanese company itself is already listed as an RLE.
What information about a relevant legal entity goes in the register?
For a relevant legal entity, the register must contain the corporate entity’s:
- Registered / principal office (effectively as a service address)
- The company register or other register on which the company appears – this might for example be the UK company register, the Charity Commission register or the central register of companies in another country
- The company’s registration number or reference
- The legal form of the entity
- The law under which the RLE is governed
- The date on which the relevant legal entity became registrable
- The nature of their control over the company – which of the conditions above the RLE meets and, for shareholdings and voting rights, which of a number of discrete bandings they fall into
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