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Persons with Significant Control - new register a great challenge for Company Secretaries


During the first few presentations of our brand new seminar, Preparing for the Changes to UK Company Law, it has become very apparent that there is one measure which has raised more concern than others. It is a measure to improve transparency of ownership and control. It will aim, where applicable, to get behind the registered owners and identify the beneficial owners and people who exercise control in other ways.

Persons with Significant Control - PSC RegisterThe concerns raised by delegates about the new register were numerous but fell into two broad areas.

  • The extent to which the requirement to register is being applied - irrespective of size, status or level of activity.
  • The amount of information required and the challenge of collecting it from entities such as trust, subsidiaries, groups and foreign-owned companies.

Among the aims of the new register, it is intended to identify individuals disguising the ultimate beneficial ownership of shares. This should increase confidence in business, make law enforcement easier and help to counter money-laundering and fraud. There will be a new legal concept – Persons with Significant Control. Companies must maintain a PSC register and ensure that it is publicly available.

Who is a Person with Significant Control?

According to the government, a PSC is someone who;

  1. holds, directly or indirectly, more than 25% of the shares;
  2. is entitled, directly or indirectly, to exercise more than 25% of the voting rights or control the exercise of those rights;
  3. is entitled, directly or indirectly, to appoint or remove a majority of the board or has control of those entitlements; or
  4. has the right to exercise, or actually exercises, significant control over the company.

Specific rules regarding shares held by nominees and shares held by trusts will also be introduced to ensure that the ultimate beneficiary of those shares can be treated under the law as a PSC.

Individuals with significant control will be required to volunteer relevant information, and will commit a criminal offence if they do not do so. Companies and company officers will be required to make reasonable enquiries, and to follow up reasonable suspicions and information that they know or should know. They will commit a criminal offence if they do not do so.

What information must be submitted for the register?

Companies will have to submit information about the immediate, legal owners of shares and then trawl through every layer of ownership above that to identify the individual people who have a significant control in that company.  Many delegates to the seminar felt this to be a substantial additional administrative burden and cost.

The public register at Companies House will contain the following information:

  • Full name
  • Service address
  • Nationality
  • Date of birth
  • Country or state of usual residence
  • Date on which beneficial interest was acquired
  • Details of beneficial interest and how it is held

Only the month and year of birth will be available to the public.  The full residential address will be supplied to Companies House but it will not be available to the public.  It will be possible to apply to the Registrar to protect beneficial owners’ full information from disclosure in exceptional cases.

A failure to supply the information will be an offence. Offenders may have their shareholders rights suspended or be forced to transfer ownership of the shares. In certain circumstances the legislation also provides for further sanctions of fines, imprisonment or both.

My colleague Roger Mason has been monitoring events surrounding the progress of this new legislation very carefully.  He will be keeping everyone up to date as he presents Preparing for the Changes to UK Company Law at many venues throughout the autumn – see this page for more details.

 

 

 
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