As part of the Small Business, Enterprise and Employment Act 2015, almost all companies and LLPs will have to maintain a PSC (People with Significant Control) register, as of April 6th 2016.
The new piece of legislation has been introduced to increase transparency about those who own and control companies. Even a small company with a single Director will now need to start a PSC register, and keep it up to date.
What many haven’t realised however, is that if a business doesn’t provide a PSC register, as of April 6th, owners could face criminal charges.
In light of the importance surrounding the new legislation, let’s take a look at what exactly a PSC register is, what steps you need to follow and what information you need to provide to comply with following these changes.
Why is this change being introduced?
At the 2013 G8 Summit, it was agreed that there was a need to enhance corporate transparency.
It was felt that complex corporate ownership structures, often with long chains of ownership, make it hard to tell who owns and controls many companies.
The PSC Register looks to ensure that those who ultimately own or control a UK company, along with the nature of that control, can be identified.
The overall aim is to create greater transparency, fight financial crime and improve trust in UK companies.
What is a Person with Significant Control?
Most broadly, a person with significant control (a PSC) is someone who substantially owns or controls a company.
More specifically, someone will usually be a PSC if they meet one or more of the following five conditions:
- They own more than 25 per cent of the company’s shares
- They hold more than 25 per cent of the company’s voting rights
- They have the power to appoint or remove a majority of the company’s board
- They have the right to exercise or actually exercise significant influence or control over the company
- They have the right to exercise or actually exercise significant influence or control over a trust or a firm that is not a legal entity which itself satisfies any of the first four conditions.
Identify your PSCs
Firstly, you need to establish how this affects you. The information you need to enter will depend on the set up of your company.
For example, if a company has two shareholders, each holding 50 per cent of the shares, both individuals will be entered on the PSC Register as they each hold more than 25 per cent of the company’s shares.
Assuming all the shares carry one vote, they will also both be noted in the register as holding more than 25 per cent of the company’s voting rights.
However, if a company has five shareholders, each owning 20 per cent of the company shares, this will be slightly different. Because no single shareholder holds more than 25 per cent of the shares (or voting rights), none of these individuals will be entered on the PSC register.
Assuming there’s no one else who meets any of the conditions, this company doesn’t have any PSCs. Having no PSC’s is perfectly acceptable, but the fact there are no PSCs must itself be entered on the PSC register.
The PSC register can never be blank.
What must a company affected do?
In order to set up a PSC list, the government states that a company is required to ‘take reasonable steps’ to identify whether there are people with significant control over the company.
If you have PSC’s, then the next step is to contact those people, or others who may know them, to confirm whether they meet one or more of a number of specific control conditions.
If they do, get them to confirm relevant information to include in the PSC register. You then need to create the Register of People with Significant Control and input the details received from PSCs.
Once all information is collated, you must confirm the information in the company’s next Confirmation Statement (which will replace the Annual Return in July).
Keep the information for existing PSCs up to date and update the register when there is a new PSC or someone ceases to meet any of the control conditions.
Further reading on legal requirements
