PSC Registers: a sledgehammer to crack a nut?

We reported in December on forthcoming rules requiring companies and LLPs to maintain a register of people with significant control (PSC).

We reported in December on forthcoming rules requiring companies and LLPs to maintain a register of people with significant control (PSC).

The rules are due to come into effect early in April, and will affect the vast majority of companies and LLPs.

There follows a summary of the key points, as they relate to companies. For brevity we have not considered LLPs, but you should be aware that similar provisions will apply to LLPs.

What is the new regime and when is it coming into force?

The Small Business, Enterprise and Employment Act 2015 inserted new PSC requirements into the Companies Act 2006 (“the Act”). Such requirements take effect on 6 April 2016 and require companies to hold and keep available for inspection a register of people with significant control over the company (a “PSC Register”). An obligation to provide this information to Companies House kicks in from 30 June 2016.

Who must be included in the PSC Register?

The primary obligation is to record in the PSC Register details of all people with “significant control” over the company. A person with significant control is defined in the Act as a person who directly or indirectly:

  1. holds more than 25% of the company’s shares; or
  2. holds more than 25% of the company’s voting rights; or
  3. has the right to appoint or remove a majority of the company’s directors; or
  4. has the right to exercise, or does exercise, significant influence or control over the company; or
  5. has the right to exercise, or does exercise, significant influence or control over the activities of a trust, and that trust meets one or more of the above four conditions.

What are the company's obligations?

In brief, a company must:

  1. hold a PSC Register and maintain, seek and keep up-to-date information on registrable persons and relevant legal entities with significant control over the company. The obligation to hold the register will apply even if there are no people falling into any of the five categories set out above
  2. keep the register available for inspection and provide copies of the register when requested
  3. from 30 June 2016, file the information from its PSC Register at Companies House. In the alternative, the company may elect to record and maintain at Companies House the information that it would otherwise have to record in its PSC Register
  4. if incorporated before 30 June 2016, provide this information as part of a new annual “confirmation statement”. As a confirmation statement must include all of the same information that would otherwise have been included in an annual return, the requirement to file a confirmation statement will replace the current obligation to file an annual return.

What are the penalties?

Failure to comply with the new regime is an offence by both the company and every officer of the company in default. This is punishable by a fine and/or up to two years in prison.

Additional obligations

The Act also creates a proactive disclosure obligation on a person or legal entity with significant control to declare their interests to the company. Failure to do so can amount to an offence which is punishable by a fine and/or up to two years in prison.

If a person with significant control fails to disclose an interest, the company can issue that person with a warning and ultimately place restrictions on their shares, for example suspending their rights to vote and to receive dividends.

If you are interested in finding out more about this or any other corporate issue, please contact Paul Raftery, Partner, Corporate department on 0161 214 0528 or email paul.raftery@weightmans.com, or otherwise speak to your usual Weightmans contact.

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