On the 6th of April 2016 a new law came into effect that requires most companies including Limited Liability Partnerships (LLP) and Societas Europaea (SE), to produce a new company register detailing any individuals who hold significant control.
This is in additional requirement to those already in place and will need to be confirmed on the company’s annual Confirmation Statement, which replaces the Annual Return.
The register will also be required as part of the application to incorporate a business. If a company is incorporated after 30 June 2016 a statement of initial control, containing the company’s People of Significant Control (PSC) information, will be necessary.
This requirement has been brought in under the Small Business Enterprise and Employment Act and it is believed will create a clearer picture of both the legal and beneficial ownership of businesses.
For the wider public interest, individuals who are a company’s ultimate beneficial owners and controllers must now be identified and details of their holdings made public in an effort to help to combat tax evasion and money laundering. In addition this will create greater transparency and confidence in UK businesses as a whole.
As set out by the Department of Business and Innovative Skills’ guidance, PSCs are individuals or legal entities who meet one or more of the five conditions outlined below: –
1. Directly or indirectly holding more than 25% of the shares (sections 7.1 and 7.4)6,
2. Directly or indirectly holding more than 25% of the voting rights (sections 7.2 and 7.4),
3. Directly or indirectly holding the right to appoint or remove a majority of directors (sections 7.3 and 7.4),
4. Otherwise having the right to exercise, or actually exercising, significant influence or control (section 7.5),
5. Having the right to exercise, or actually exercising, significant influence or control over the activities of a trust or firm which is not a legal entity, but would itself satisfy any of the first four conditions if it were an individual (section 7.6)
A company must take reasonable steps to determine PSCs and in any event the register must never be empty. During the investigating process the register must show as “The company has not yet completed taking reasonable steps to find out if there is anyone who is a registrable person or a registrable relevant legal entity in relation to the company.”
The substantial information required includes the PSC’s: –
• Date of birth
• Country, state or part of the UK where the PSC usually lives
• Service address
• Usual residential address
• The date when the individual became a PSC in relation to your company18
• Which of the five conditions for being a PSC the individual meets, with quantification of the interest where relevant
• Any restrictions on disclosing the PSC’s information that are in place
The residential address and date of birth of the PSC will not appear on the central public register
To comply with the new legislation companies must record the information on their own register and make this accessible at their registered office free of charge to anyone who requires it, as well as filing the information at Companies House to be made available on the central public register. It is also vital that the information is kept up-to-date and Companies House advised of any changes.
In circumstances where a company may not have a PSC it must be satisfied that they have taken all reasonable steps and be confident that there are no individuals or legal entities which meet any of the conditions 1 to 5 in relation to the company. The following must then be enter onto the PSC register:- “The company knows or has reasonable cause to believe that there is no registrable person or registrable relevant legal entity in relation to the company.”
A company may be liable for fines and may even commit criminal offences if they do not comply with the new PSC regulations and keep this information up-to-date. PSCs may also be personally liable if they do not disclose their interests and can ultimately have their rights in the company diminished.
Complex circumstance may require further legal assistance.
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