The Government has published its response to a discussion paper published by the Department for Business, Innovation and Skills seeking views on the core elements of the register of people with significant control over UK companies that will be introduced by the Small Business, Enterprise and Employment Bill.
The PSC Register
Under the Small Business, Enterprise and Employment Bill, every company will be required to maintain and keep open for public inspection a ‘PSC register’: a register of persons having significant control over the company. This register will contain prescribed information about each person of significant control (or ‘PSC’), including certain personal details and details of the nature of that individual’s control over the company.
At present companies record only the immediate, legal owners of their shares. In future, they will have to look through that to identify the individuals who ultimately have significant control of the company and this information will be made public. It appears from the consultation process that the new requirements will apply to all private companies limited by share or guarantee and will be extended to other corporate vehicles registered at Companies House, such as LLPs. Breach of these provisions by the officers of the company will be a criminal offence.
Who is a PSC?
The proposed meaning of ‘persons with significant control’ includes individuals who, directly or indirectly:
- hold more than 25% of the shares in the company;
- exercise, or control the exercise of, more than 25% of the voting rights in the company;
- are entitled to appoint a majority of the board of directors or control the exercise of rights to appoint or remove a majority of the board;
- have the right to exercise significant influence or control over the company, or actually exercise such influence or control; and/or
- have the right to exercise significant influence or control over a trust or firm which itself meets one or more of the first four conditions.
Increased transparency v increased administration
The intention of having a central public register of people with significant control is that greater transparency will reduce criminal misuse of companies (for example, for money laundering), make law enforcement easier and increase trust in business. However, in practice, these proposals will add significantly to the administrative burdens of companies and persons who are, or may be, significant controllers, particularly for those companies with a diverse and changing shareholder base.
The requirement to maintain a PSC Register is due to come into force in January 2016 with the requirement to file that information at Companies House being effective from April 2016. Understanding the requirements of the PSC Register can be difficult or unclear and the risk of criminal sanctions means companies should start planning now for how they will comply with the new requirements.