Is Your Business Ready to Comply with the PSC Register Requirements?
WHERE DOES THE PSC REQUIREMENT COME FROM?
This new requirement is introduced by the Small Business, Enterprise and Employment Act 2015 (the “Act”).
The rules are quite complex and therefore we recommend that you review the Department for Business Innovation and Skills guidance to assist with the interpretation of the PSC requirements. The guidance also includes sample wording that can be used for particular statements:
This article is only intended to give you an overview of the PSC requirements and is primarily aimed at companies. Please note that the PSC requirements slightly differ for LLPs.
HOW WILL THIS AFFECT YOU?
If you own or manage a UK company (excluding certain public companies) (“Business”), you must take reasonable steps to ascertain who is a ‘person with significant control’ (“PSC”). This process could include reviewing your articles of association, register of members and shareholder agreements.
As part of the ‘reasonable’ steps, you should give notice to all persons that you reasonably believe are PSCs. You can also give notice to persons that you know, or have reasonable cause to believe know, the identity of a PSC (e.g. advisers acting for a PSC) in order to obtain further information. Please note that recipients of such notices will commit a criminal offence if they fail to respond to such notices within one month or if they provide false information. The PSC register should state the steps taken to identify PSCs.
If you identify anyone that meets the PSC requirements, you must confirm the details are correct with the PSC. Following confirmation, and only after confirmation, you must record such details in the PSC register and file the information at Companies House in your Annual Return (soon to be called the ‘annual confirmation statement’).
The information from your Annual Returns will be stored in the Companies House records which are publically available online. The internal PSC register must be made available for inspection by any person upon request (subject to the Business seeking a court order within 5 days of the request to waive the right to inspection e.g. if the inspection is not for a proper purpose).
The PSC register must be maintained and kept up to date at all times and updated at Companies House annually. Please note that it is possible for PSC registers to be kept solely at Companies House and, if this is the case, it must be up-to-date at all times.
WHO IS A PSC?
An individual will be a PSC of a Business if it meets one or more of the following conditions:
they hold more than 25% of the Business’ shares (directly or indirectly) (Condition 1);
they hold more than 25% of the Business’ voting rights (directly or indirectly) (Condition 2);
they hold the right, directly or indirectly, to appoint or remove the majority of the board of directors of the Business (Condition 3);
they have the right to exercise, or actually exercises, significant influence or control (“SIOC”) over the Business (Condition 4); or
they are the trustees of a trust or members of a firm that meet any of Conditions 1 to 4 (in their capacity as such) and they have the right to exercise, or exercises, SIOC over the activities of that trust or firm (Condition 5).
The Conditions that apply must be stated in the PSC register.
WHAT AMOUNTS TO SIOC?
SIOC can apply where:
a person has the right to exercise SIOC e.g. they have absolute decision making powers or veto rights relating to the running of the Business or they have absolute veto rights over appointing directors; or
a person actually exercises SIOC e.g. they are involved in the day-to-day management of the business; they regularly or consistently direct or influence a significant section of the board; they are regularly consulted on board decisions and their views influence decisions made by the board; or their recommendations are almost always followed by shareholders.
CAN COMPANIES BE CLASSED AS PSC?
The PSC requirements apply to companies, LLPs and trusts if they meet the PSC requirements and are subject to their own disclosure requirements. Such entities are known as a ‘relevant legal entity’ (“RLE”) and should be included in the Business’ PSC register.
ARE THERE ANY EXEMPTIONS?
Yes, there are a number of ‘safe harbours’ in the Act which exclude:
persons who provide advice in a professional capacity (e.g. lawyers or accountants);
persons in a commercial relationship with the Business (e.g. suppliers, customers or lenders);
a managing director; sole director; or a non-executive or executive director who holds a casting vote;
an employee acting in the course of their employment; or
a person who makes recommendations to the shareholders on an issue (or set of issues) on a one-off occasion, which is subject to a vote.
WHAT INFORMATION NEEDS TO BE INCLUDED IN THE PSC REGISTER?
For individuals, the following information must be disclosed in the PSC register: name; service address; usual country or state of residence; nationality; date of birth; usual residential address (this won’t be publically available); date on which such person became registrable as a PSC in relation to the Business (this will be 6 April 2016 for existing Businesses); and the nature of their control over the Business.
For RLEs, the following information must be disclosed in the PSC register: corporate or firm name; registered or principal office; the type of legal entity and the law by which it is governed; if applicable, the register of companies in which it is entered (including details of the state) and its registration number in that register; the date on which it became registrable as a RLE; and the nature of its control over the Business.
DO YOU STILL NEED TO KEEP A REGISTER IF THERE ARE NO PSCs?
Yes, the PSC register should state that there are no PSCs or that you are still taking reasonable steps to obtain information. The PSC register must never be empty and there is standard wording to include in the PSC register if there are no PSCs.
WHAT WILL HAPPEN IF YOU DO NOT COMPLY WITH THE PSC REQUIREMENTS?
A criminal offence may be committed by the Business and every officer in the Business in default. The sanctions are:
imprisonment up to 2 years; and/or
an unlimited fine.
There is no defence available for an inadvertent breach of the PSC requirements, so compliance is mandatory from 6 April 2016.
We recommend that you review the BIS guidance referred to above to obtain further information on your PSC requirements. However, if you would like any advice on complying with your PSC obligations, please get in touch by emailing us at firstname.lastname@example.org.
Please note: the content of this article is for general information only and does not constitute legal advice. Specific legal advice should be taken in any specific circumstance.