Back in 2016 and faced with the proliferation of money laundering, tax evasion and other forms of commercial corruption the government introduced a requirement for the registration of the individuals and corporate entities who had effective control over certain types of company. The drive to increase transparency and encourage good behaviour on the part of business has been relatively successful. A review in 2019 of how the Register of People With Significant Control (‘the PSC Register’) was operating in practice found that its aims were for the most part being met without a disproportionate cost to business.
Concerns do exist about the veracity of some of the information contained on the PSC Register and we believe it’s likely the government will review the scheme in the not too distant future. For now, it’s important that when you register a new company or take on responsibilities for an existing company you are aware of the PSC requirements.
What Steps Must We Carry Out To Complete PSC Requirements?
An officer of the company must carry out the following steps:
- Identify those with significant control over the company
- Contact the people identified as having significant control to confirm they have ownership or control and record their details on the company’s PSC Register
- File the information at Companies House (with the annual Confirmation Statement (Return)) on the central public register
- Keep the information on the PSC Register up-to-date when necessary and update information at Companies House when submitting the next Confirmation Statement
Note that if seeking to incorporate a company or LLP a statement of initial significant control must be filed at Companies House (with any further documents requested for the application process).
How Do I Know If Someone Has Significant Control Of The Company?
The criteria for establishing whether someone should be listed in the PSC Register are as follows:
- They own more than 25% shares (directly or indirectly) in the company
- The holding represents more than 25% of voting rights (directly or indirectly) in the company
- The person has the power to directly or indirectly appoint or remove majority of the board of directors of the company
- They have the right to exercise or actually exercise significant control over the company
- They hold the right to exercise or actually exercise significant influence over the activities of the trust or company that satisfies any of the other four conditions
It follows therefore that an officer of the company should review the company register of members to identify any shareholders holding more than 25%. Alongside this, the articles of association should also be reviewed to identify those holding over 25% voting rights. To consider if an individual has the right to appoint/remove majority of the board of directors, the company constitution must be reviewed to identify those satisfying this condition.
Can A Company Be a PSC?
Yes. If a company is owned and controlled by a legal entity the entity is still considered a PSC and its details may be placed on the PSC register. In the words of the legislation, the entity must be ‘registerable and relevant’ to the company in question. This means it must:
- Maintain a PSC Register of its own
- Comply with Chapter 5 of the Financial Conduct Authority’s Disclosure and Transparency Rules (DTRs) or
- Hold voting shares in respect of trading on a regulated market in the UK or EEA (other than the UK) or on specified markets in Switzerland, the United States, Japan and Israel
- Be the first relevant legal entity in your company’s ownership chain.
What Happens If I Don’t Complete The PSC Register?
The PSC register is designed to combat a number of threats to overall trust in UK businesses. Sanctions for non-compliance are significant and could lead to company officers being fined or imprisoned. Any failure to submit accurate information to the PSC Register or to comply with notices can, in England and Wales result in unlimited fines and prison sentences of up to 24 months.
Contact Us
If you run a company in England and Wales you must meet the PSC requirements. We can assist you in completing the PSC Register and by liaising with persons who have significant control of your company who may be difficult to locate or obtain information from. For more please contact our director Shubha Nath at Nath Solicitors on 44 (0) 203 670 5540 or contact the firm online.
