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The PSC Regime – new rules for UK Companies

The PSC Rules

The government recently introduced new legislation with the aim of combating criminal activity such as tax evasion, money laundering and terrorist financing.

UK companies and limited liability partnerships are now required to identify and keep a register of ‘people with significant control’ (known as PSCs) and from 30th June will be subject to additional disclosure requirements. The aim is to ensure that the individuals who are a company’s ultimate owners and controllers are identified and details of their holdings made public.

Who do the PSC rules apply to?

With limited exceptions, the rules apply to all UK private limited companies and LLPs. This includes charitable companies and other companies limited by guarantee.
The rules don’t apply to LSE Main Market and AIM listed companies, as these are subject to existing FCA rules relating to the disclosure of information.

Why were the rules introduced?

The legislation is designed to ensure that the ultimate beneficial owners and controllers of UK companies are identified and details of their holdings or controlling interests made public. The overriding aim is to make it harder to use corporate structures to hide criminal activity.

These rules have their origin in a G8 initiative to increase clarity and transparency around company ownership. The UK legislation is part of EU and wider initiatives to address these perceived failings.

Who is caught?

In relation to a company, a PSC is someone who meets any one of the following criteria:

  • Owns more than 25% of the company shares (whether directly or indirectly)
  • Holds more than 25% of the voting rights (whether directly or indirectly)
  • Has the right to appoint or remove a majority of directors on the board (whether directly or indirectly)
  • Has the right to exercise, or actually exercises, significant influence or control over the company
  • Has significant influence or control over a trust or partnership that meets one of the other conditions

Similar rules apply to LLPs.

The concept of indirect control should be considered in the context of group companies and a chain of ownership. A person may be deemed to hold an indirect majority stake in, or to exert control over, a company by virtue of a holding in one or more intermediate holding companies.

Companies in a group structure and ‘Relevant Legal Entities’

Whilst a PSC is a actual person, UK companies may also appear in a PSC register if they satisfy the criteria for being a Relevant Legal Entity (known as an RLE). Broadly speaking, an RLE is a company that is itself required to maintain a PSC register and which also satisfies one of the criteria to be a PSC.

In the context of group structures and a chain of ownership, the concept of RLEs needs careful consideration as to the registerable interests to be recorded in a company’s PSC register and whether it is necessary to look further up a chain of ownership to identify a PSC or RLE.

What information is required and how do you file it?

Both companies and LLPs need to record details of the PSCs and/ or (as appropriate) RLEs in a PSC register, which is to be held at the Company’s registered office. The register must contain certain prescribed information, which includes:

In relation to each PSC:

  • Full name and date of Birth
  • Service address/usual residential address
  • Country/state of residence
  • Nationality
  • Date on which the PSC or RLE became registerable
  • The nature and extent of control (i.e. the reason that they are a PSC or RLE)

In relation to each RLE:

  • Company name and registration number
  • Registered office
  • Legal form and governing law
  • Place of registration
  • Date on which the PSC or RLE became registerable
  • The nature and extent of control (i.e. the reason that they are a PSC or RLE)

From 30 June 2016 companies will be required to file an Annual Confirmation Statement (the new name for an Annual Return) on the due date for their next annual return. Confirmation Statements will contain details identifying all relevant PSCs and RLEs.

Newly incorporated companies will be required to file a statement of ‘initial significant control’ at Companies House, when first registered.

Action required and penalties for non-compliance

PSCs have an obligation to notify the company within one month of becoming a PSC. It is an offence if they fail to notify or respond to a notice from the company. In addition, the company may apply sanctions in relation to shares held by the PSC and the rights attached to those shares.

Companies have to take reasonable steps to identify PSCs. Failure to comply may result in the company and its directors committing a criminal offence which can lead to imprisonment or a fine.

What if a PSC does not want their details on the public record?

The PSC may consider applying under the Companies House protection regime. This regime is intended to protect those PSCs, or a person who lives with a PSC, from public disclosure where such disclosure may put them at serious risk of violence or intimidation.
Persons holding shares in UK companies through nominee arrangements may be forced to disclose their identity as PSCs. Alternatively, we would be happy to discuss reviewing your corporate structure to check if disclosure under the PSC rules can be legally avoided.

Further guidance

We would be happy to discuss with you any questions that you may have about how these rules apply to you and your business. Please contact either james.bryce@squareonelaw.com or john.hammill@squareonelaw.com.

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