Published: May 17th, 2016 in Business
From 6th April 2016 it became mandatory for all unlisted UK companies, including dormant companies and Limited Liability Partnerships to keep an official Persons with Significant Control register – or PSCs as they are also referred to.
The purpose of this move is welcomed by many as it reflects a level of transparency within business. By publishing details of individuals intrinsically linked to the control of a company, the government hopes to promote trust and deter corporate crime.
Legally speaking, this change stems from the Small Business, Enterprise and Employment Act 2015. This Act amends the 2006 Companies Act by introducing Part 21A, which specifies provisions for PSCs.
It is vital that companies gather the necessary information and register it for inspection purposes. Any failure to provide the relevant information (or the falsification of information) is likely to lead to criminal penalties.
The new provisions specify five factors that govern whether a person may hold significant control. For companies these are:
- Individuals who control more than 25% of the company.
- Individuals who control more than 25% of company voting rights.
- Individuals who have the power to appoint or remove a majority of the board of company directors.
- Individuals who have the ability to exercise significant influence or control over a company.
- Individuals who have the ability to exercise significant influence or control over activities of a trust or firm which itself meets one or more of the first four conditions.
This differs slightly for LLPs, who must consider:
- Individuals who own more than 25% of assets on winding up.
- Individuals who own more than 25% of company voting rights.
- Individuals who have the power to appoint or remove a majority of people involved in management.
- Individuals who have the ability to exercise significant influence or control over a company.
- Individuals who have the ability to exercise significant influence or control over activities of a trust or firm which itself meets one or more of the first four conditions.
So what does this mean in practice?
Information on PSCs must be kept up to date and made public to Companies House on an annual basis. This must be submitted along with the new confirmation statement, which replaces the existing annual returns. Information specific to individuals will include their name, month and year of birth, nationality, service address and details of the business in question.
Companies and Partnerships must ensure they do all they can to maintain their PSC register accurately; and the register must never be empty. When a PSC cannot be identified, companies must include a prescribed statement to explain this within its register. As indicated previously, a failure to uphold any aspect of the PSC register could lead to criminal penalties for both the company and its officers, which is not the case with the existing annual returns.
