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Company law reforms designed to enhance the visibility of company ownership require directors to take important actions by the end of March, according to Philip Round, a partner in the corporate team at George Green LLP.
“One of the key objectives of the Small Business, Enterprise and Employment Act 2015 is to reduce the risk of criminal activities and tax evasion by increasing the transparency around who controls UK companies,” said Philip Round. “To this end, all companies, apart from LSE main market companies, AIM listed companies and companies whose shares are admitted to trading on certain other specified markets will, with effect from 6 April 2016, be required to maintain a register, known as the PSC Register, of people with significant control over the company. From 30 June, companies will need to include such information on the annual confirmation statement filed with Companies House, which will replace the filing of annual returns.”
Mr Round goes on to explain the criteria for significant control. “Anyone who, directly or indirectly, and alone or jointly, holds more than 25% of a company’s nominal share capital, or controls more than 25% of the voting rights at shareholder level, or is entitled to appoint or remove a majority of the company’s board of directors, must be included on the PSC Register. If, however, the individual is not a direct shareholder, but exercises such control via an intermediate holding company which is itself obliged to maintain a PSC Register, the details of the intermediate holding company will be entered on the subsidiary’s PSC Register. The individual with ultimate control will then be entered on the intermediate holding company’s PSC Register.”
“Equivalent obligations apply to LLPs, with similar tests for significant control based on an entitlement to more than 25% of the capital or voting rights, and the right to appoint or remove a majority of management.”
Mr Round continues, “There is, however, a wider category of people who are entitled to, or in fact, exercise significant influence or control but who do not necessarily satisfy the above tests. Guidance has been published on the nature of significant influence or control for this purpose. Examples are given of those who hold veto rights over significant decisions in relation to a company, such as a change in the nature of its business. This is likely to constitute significant influence or control. Where such veto rights are limited to specific decisions designed solely to protect the value of a minority shareholding, such as a veto over changes to the company’s constitution, this will probably not constitute significant influence or control. Given the detailed nature of the guidance, we strongly recommend that any companies who are unsure whether to include someone on their PSC Register should seek legal advice.”
Philip Round explains that companies are obliged to take reasonable steps to identify registrable persons, and anyone who does not comply with an information request risks disenfranchisement of their shares. “Companies, LLPs and their officers, and individuals with significant influence or control, who fail to discharge their duties under the legislation are committing a criminal offence. It is therefore essential that companies and LLPs act now to put in place the necessary procedures to create, maintain and update their PSC Register.”
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