New transparency and reporting rules for companies come into effect from 6th April 2016. From that date, most UK companies and LLPs will need to identify and record the people who control or own them. This “register of people with significant control” will be known as a “PSC register”.
From 30th June 2016, the information will also need to be filed on the public register at Companies House as part of a new annual “confirmation statement” taking the place of the annual return.
The rules are aimed at achieving transparency of individuals controlling companies who might have been previously hidden by opaque corporate or trust structures. Business owners and their advisers will need to be aware of the new regime as they may be subject to their own disclosure obligations and sanctions for non-compliance.
So what steps should you be taking now?
Broadly, there are five new PSC conditions relating to individuals which are:
- Does an individual, directly or indirectly, hold more than 25% of the shares?
- Does an individual, directly or indirectly, hold more than 25% of the voting rights?
- Does an individual, directly or indirectly, hold the right to appoint or remove the majority of the board?
- Does an individual hold the right to exercise, or is actually exercising, significant influence or control over the company?
- Does an individual hold the right to exercise, or is actually exercising, significant influence or control over a trust or firm which would satisfy one of the first four conditions if it were an individual?
In order to be a PSC, only one of these criteria need to be satisfied.
To determine whether any individuals fall within the five new PSC conditions, company officers should first review their company’s register of members and articles of association to identify blocks of shareholding over 25% and identify, or try to identify, direct or indirect voting rights over 25%. The company’s articles of association should also be checked to establish whether anyone has the right to appoint or remove the majority of the board.
A company will need to consider whether anyone who does not meet the first three conditions could have significant influence or control over the way the company is run, irrespective of any formal role.
Determining who exercises significant influence and control is a little more difficult and may require a judgment call. Examples given by the draft guidance include having absolute decision rights or absolute veto rights over decisions related to the running of the business but “veto rights in relation to certain fundamental matters for the purposes of protecting minority interests” are unlikely, on their own, to trigger disclosure.
If you have concerns regarding the confidentiality of details that might become public under the PSC regime or if you would like to discuss more complex arrangements where judgment will need to be exercises as to whether or not the PSC disclosure requirements are likely to be triggered, please speak to your contact partner or Lubbock Fine partner, Lee Facey firstname.lastname@example.org.