UK company law is quietly being reformed by the Small Business, Enterprise and Employment Act 2015 (the “Act”). Changes are being introduced that will affect almost every company. Its provisions are being phased in gradually over six stages, some are already implemented and others will come into force during this year.
The Act looks to increase trust in UK businesses by improving transparency of ownership. More onerous transparency requirements should reduce tax evasion and make it more difficult for UK companies to be used for criminal activities like money laundering and terrorist financing.
A key piece, designed to achieve the desired trust and transparency, has come into force today without much fanfare. The Persons with Significant Control Register (“PSC Register”).
The introduction of the PSC Register will allow those with beneficial ownership in a company (i.e. those who really financially benefit) to be readily identified. Companies and their shareholders should no longer be able to disguise ultimate ownership with the use of nominee companies and trust structures.
Who needs to create a PSC Register?
The new rules will apply to all UK companies, expect those subject to the disclosure requirements of DTR 5 (London Stock Exchange main market and AIM companies) and some others who are already required to make details of their major shareholdings public. Limited Liability Partnerships are also obliged.
From 6 April 2016, companies must create and maintain their PSC Register. As the name would suggest its contents are the necessary identification details of all Persons with Significant Control (“PSC”) of the company.
Who is a PSC?
A PSC is an individual who meets a least 1 of these 5 conditions, that they:
[if !supportLists]1. [endif] directly or indirectly hold more than 25% of the nominal share capital; or
[if !supportLists]2. [endif]directly or indirectly control more than 25% of the voting rights at general meetings; or
[if !supportLists]3. [endif]directly or indirectly be able to control the appointment or removal of a majority of the board of directors of a company; or
[if !supportLists]4. [endif]actually exercise or have the right to exercise significant influence or control over the company; or
[if !supportLists]5. [endif]actually exercise or have the right to exercise significant influence or control over any trust or firm (which is not a legal entity) that has significant control (under one of the 4 conditions above) over the company.
The government have produced guidance on the interpretation on these but the ability of the average company to readily determine who is a PSC remains to be seen.
What’s next?
From 30 June 2016, companies will be required to send the requisite information from their PSC Register to Companies House whenever they deliver their annual confirmation statement (formerly the Annual Return) to Companies House. New companies will have to provide the information on incorporation.
Companies House should have a full set of PSC data on all relevant UK companies by July 2017.
As the rules on the PSC Register are not quite be the end of the story. The European Fourth Money Laundering Directive must be implemented by 26 June 2017 and, although the Act’s provisions will fulfil most of the requirements of the Directive, some changes to the detail will be necessary.
For more information on the Act please contact:
stephanie.farrell@bellwethergreen.com or april.bingham@bellwethergreen.com
