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PSC register requirements

The PSC register identifies the “Persons with Significant Control” over most businesses.  From 6th April 2016, every company and LLP requires a PSC register to comply with the Small Business, Enterprise and Employment Act 2015 .

The PSC register is public. From June 2016, the register forms part of the details filed at Companies House.  Companies and LLP’s must now gather the required information. Shareholders and LLP members must co-operate to provide the requested information.

PSC register: why introduce it?

Theoretically, the PSC register reduces tax evasion, and so increases HMRC’s receipts. It will be harder to use UK businesses for money laundering. Thus crime will fall which reduces public spending on the criminal justice system.

PSC register: who is caught?

Every business is caught, although some limited exceptions include quoted companies. It applies, if you manage a:

  • Limited company;
  • Unlimited company;
  • Certain public company;
  • LLP.

PSC register: what’s a “person with significant control”

A PSC is anyone who directly or indirectly:

  1. Holds more than 25% of the nominal share capital; or
  2. Controls more than 25% of the votes at a general meeting; or
  3. Controls the appointment or removal of a majority of the board; or

Exercises, or had the right to exercise, control or significantly influence:

  1. The company; or
  2. Any trust or firm which meets any of 1 – 4.

An individual or entity will have “control” if they have the power to direct the business’s policies or activities. So, an individual or entity exercising “significant influence” will be able to ensure that particular policies or activities are executed.

PSC register: The challenges

First determine which individuals or what entity in your business counts as “persons with significant control”.  Companies House and HMRC will scrutinse company structures to determine who really makes decisions.  The consequences of non-compliance will seriously disrupt day-to-day management. We help you avoid this.

An objective viewpoint is key. To comply, company shareholders or LLP members should provide full disclosure. Shareholders or members based overseas may be uncooperatative, which may cause problems. We provide an objective viewpoint to ensure all shareholder and member details are obtained, thus preventing non-compliance.

Businesses with registered legal owners face challenges. The beneficial owners may not be the same, i.e. the nominee shareholder, where the beneficial owner decides and the legal owner communicates the decision. Here the beneficial owner is caught by the “indirect” inclusion. This also applies to overseas parents or shares held in trust.

PSC register: how to comply

First ensure your business has a clear, public, PSC register from 6 April 2016. The PSC register must include the names of the individuals with significant control, as well as:

  • Their service address;
  • Their country, or state, or part of the UK in which the individual is resident;
  • Their nationality;
  • Their date of birth;
  • The date on which the individual obtained significant control; and
  • The nature of the individual’s control over the business.

Smaller and medium-sized businesses face an additional administrative burden. Business must update the register if they “know or might reasonably be expected to know that a change to the persons with significant control has occurred”. The PSC register is public, subject to certain strict exemptions to be consulted on by the department for Business, Innovation and Skills.

From 30 June 2016, UK businesses must include the PSC register information in their “Confirmation Statements”. Confirmation Statements replace annual returns.

PSC register: criminal penalties for non-compliance

Non-compliance incurs criminal penalties.  Penalities extend to the defaulting company’s

  • Officers;
  • Relevant individuals or entities;
  • e.g. shareholders or members who have not submitted the information requested.

What’s more, persons with significant control can have their voting rights removed, if they don’t comply with the company’s request for information.

Small Business, Enterprise and Employment Act: additional changes

The Small Business, Enterprise and Employment Act contains further potentially important changes. For information on the LLPs obligations click here.

Corporate directors abolished

Now, all UK directors must be natural persons. No UK Company may appoint corporate directors.  Hence it will be easier to identify who actually runs the company. All existing corporate directors will automatically cease to be directors one year after this measure comes into effect.

There is speculation that limited exceptions will apply where:

  • All directors of the corporate director are individuals; and
  • The law under which the corporate director is established, if not UK registered, requires
    • The corporate director’s individual officers details to be accessible through a public register.

Note, companies have limited liability whereas individuals do not.  First examine your directors and officers insurance policies. Directors now required to act personally, may want increased indemnities or insurance.

Directors duties apply to shadow directors

Shadow directors are now subject to the general duties that apply to directors: ‘where and to the extent they are capable of so complying’.

Now a company could litigate against the shadow director who breaches those duties.  Future regulations will clarify shadow directors’ duties, as some duties will not apply to shadow directors.

Investers who appoint board members or observers should avoid persons being classed as shadow directors. Alternatively, investors must protect shadow directors against claims.

Bearer shares abolished

You prove your proprietorship of bearer shares, by physically holding the share certificate. This compares to ordinary shares, where you prove you own the shares by being the registered holder.

The act prohibits issuing fresh bearer shares. You must surrender existing bearer shares, and convert them to registered shares filed at Companies House, within 9 months.  If you don’t convert your bearer shares, the Court will sanction a cancellation procedure.

Few UK companies issue bearer shares. However, bearer shares are used for structuring and tax planning. We do convert bearer shares to registered shares.

Confirmation statement replace annual returns

Confirmation statements replace annual returns.  Confirmation statements must be filed at Companies House every 12 months. The period between filing is now more flexible.

Central register option for private companies

Private companies can chose to stop preserving their own company books in relation to:

  • Persons with significant control;
  • Directors’ addresses;
  • Secretaries’;
  • Directors; and
  • Register of members.

Instead, they can file comparable information at Companies House on the central register.

Protection of date of birth details

Companies House no longer shows the full date of birth. Hopefully, this reduces identity theft. It also mean it harder to hide a private company’s  power base.

Summary

The corporate regulatory landscape is ever changing. The government is pressured to provide transparency of ownership of control. The PSC register implements transparency of ownership of control. The register comes into force on 6 April 2016. There are grey areas, which we can solve for you.

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