Some major changes were recently made to the Companies Act 2006 by the Small Business, Enterprise and Employment Act 2015 and some of the key sections of the new Act will soon be coming into force. From 6 April 2016, the new Act requires companies to maintain a register of people with significant control (“PSC”) over the company. From 30 June 2016, people included in the PSC register will need to be included in the Company’s annual confirmation statement, which will replace the current annual return, and information on such people will also need to be included on the incorporation of a new company.
These represent significant changes to the information recorded about companies as the people who actually control companies are sometimes quite different from those who are recorded as shareholders. The information on the PSC register will be available online at Companies House for public inspection and must be made available by the company on request.
These new rules will apply to almost all public and private UK companies and all limited liability partnerships. Even dormant companies will be expected to comply. Only companies publicly traded on a regulated market in the UK or EEA or on specified markets in the USA, Switzerland, Japan or Israel are exempt along with companies that have to report to the FCA under DTR5.
For a company, a PSC is:
- anyone who holds more than 25% of a company’s issued shares by nominal value, whether directly or indirectly, or more than 25% of the voting rights;
- anyone who has the right to appoint or remove a majority of the board of directors;
- anyone who has the right to exercise (or who actually exercises) “significant influence or control” over a company – by contract, for example.
A right to exercise significant influence or control might include: an ability to direct the company’s policies or activities; an ability to make the entity adopt that person’s policies or activities; veto rights or absolute decision rights relating to the running of the business or appointment of officers; or the use of IP rights ownership to influence decisions. Such rights might arise from the company’s articles, a shareholders’ agreement or a company contract. People can also constitute PSCs if they habitually act in conjunction with other stakeholders to achieve any of these ends.
While a PSC is by definition an individual, your company might be owned or controlled by another legal entity. Under certain circumstances, that legal entity will be a “relevant legal entity” (“RLE”) and will need to be entered onto your PSC register.
There are also additional rules relating to non-RLE entities with significant control of your company (such as an overseas company which is not traded on one of the specified public markets) whereby an RLE or an individual holding a majority of the voting rights in the non-RLE entity might need to be recorded in your company’s PSC register.
What do you need to do?
- On behalf of the company you must take reasonable steps to find out if there are people (or entities) that have significant control over the company;
- Contact such people to confirm whether they meet one or more of the relevant conditions and, if so, obtain the relevant information to be filed on the company’s PSC register;
- Put the information on your company’s PSC register;
- File the information at Companies House on your annual confirmation statement;
- Keep the information up to date.
We will, of course, be happy to help you with this new process. If you would like our assistance with collating your PSC register or simply want a more detailed Info Sheet, setting out the information you need to collect, please contact me on firstname.lastname@example.org.