Why you need to implement a PSC register now

Ercan Demiralay FCCA explains why you must register people with significant control as part of a new reporting requirement for UK businesses.

What does significant control mean? Who would these people be?

The government has issued guidance on this which says that persons with significant control is an individual who meets one or more of the following conditions in relation to your company:

• Directly or indirectly holding more than 25% of the shares
• Directly or indirectly holding more than 25% of the voting rights
• Directly or indirectly holding the right to appoint or remove a majority of directors
• Otherwise having the right to exercise, or actually exercising, significant influence or control
• Having the right to exercise, or actually exercising, significant influence or control over the activities of a trust or firm which is not a legal entity, but would itself satisfy any of the first four conditions if it were an individual

So it is similar to the list of members?

Not necessarily; in some cases persons with significant control will be the same body of individuals as the shareholders, e.g. three equal voting shareholders in a business over which no-one else has any influence or control.  But in many cases the list of those with control will be different to the list of members.

For example, a UK company with six equal voting direct shareholders won’t have any persons with significant control that satisfy conditions 1 or 2 above.  In that case, it will be necessary to look at the other conditions and take reasonable steps to determine if anyone has the right to exercise significant influence or control, e.g. through a relationship with a key customer or supplier.

Or, as can be the case in a family run business, the company founder may have a small shareholding, but exercises significant influence on the other shareholders on how to vote and whose recommendations are usually followed.

Identifying those with significant control may be a little complicated, will it take long to put this together?

The register needs to contain quite a lot of information about each person with significant control, including:

• The date when the individual became a PSC in relation to your company
• Which of the five conditions for being a PSC the individual meets, with quantification of the interest where relevant

Once you have determined all of the information needed for each person with control, it then has to be confirmed. The easiest route is likely to be by asking each person individually. When this is completed, you can enter the information on the register.

Missed the 6 April deadline – how can I comply quickly?

The government guidance contains a useful ‘work in progress’ provision.  All you need in place now is a register in the name of your company that contains the phrase:

“The company has not yet completed taking reasonable steps to find out if there is anyone who is a registrable person or a registrable relevant legal entity in relation to the company.”

How long have I got to complete the details?

You will need to have identified those with significant control, gathered and confirmed the required information and entered it onto your register so that it can be filed at Companies House when you would next be filing your Confirmation Statement from 30 June.

What is the Confirmation Statement?

The Confirmation Statement replaces the Annual Return from 30 June.  The PSC information has to be filed annually as part of the Confirmation Statement.  The information filed will be on the public record, except for some sensitive details such as a residential address.

What happens where a UK company is owned by a trust? Do you just list the trustees on the register?

Not quite. If the trust were to satisfy any of the first four conditions if it were an individual, it would be necessary to look through and identify if someone has the right to, or actually does, exercise significant influence or control over the activities of the trust.

The government has issued guidance on the meaning of significant influence or control over companies and provides the following as examples in the context of trusts owning companies:

• A person with control could be someone with the right to appoint or remove any of the trustees
• The right to direct the distribution of funds or assets
• The right to direct the investment decisions of the trust
• The right to amend the trust deed or revoke the trust

So, if there are individuals who have those rights, then these names would need to be added to the person with significant control register of the company.

What about nominee companies?

If shares or rights in a company are held by a nominee, they should be treated as if they were held by the person for whom the nominee is acting. If this person is someone with significant control in relation to the underlying company, you must enter their details on the register. So, in effect, you ‘look through’ the nominee to see who is behind the arrangement.

What if the nominee is acting for a company and not an individual? Presumably a company can’t be a person with control?

You are correct; a company cannot be a person with control by definition, but a company must be listed on the register if it satisfies any person with control conditions above and is also required to keep its own register. So if the nominee is acting for another UK company that otherwise satisfies one or more of the conditions, then that company should be entered onto the register.

Isn’t there sufficient information on the public record for UK companies?

The government doesn’t think so. It wants to look behind the structures that, whilst being useful for many reasons, have a resulting side effect of disguising the ownership of some UK companies.

What if I don’t get this done in time?

Non-compliance with the person with significant control regime is a criminal matter. It remains to be seen how prosecutions will arise, but you need to take it seriously.

The content of this post is up to date and relevant as at 09/06/2016.

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