CSP 10.9A Register of People with Significant Control

Contents

CSP 10.9A Register of People with Significant Control

People with significant control

Relevant legal entity

Obligation to notify

Sanctions companies can impose

The PSC register

Other information to be noted on the PSC register

Disclosure to Companies House

Protection against disclosure

Precedent 10.D2 Forms of notice relative to PSC Register obligations

(A) Notice to an individual whom the company knows or has reasonable cause to believe to be a registrable person in relation to it.

(B) Notice to a person whom the company knows or has reasonable cause to believe to be a registrable Relevant Legal Entity in relation to it.

(C) Notice to a person whom the company knows or has reasonable cause to believe to have knowledge of someone who is a registrable person in relation to it.

(D)Notice to an individual whose details are registered on the company’s PSC register where the company knows or has reasonable cause to believe that those details have changed.

(E)Notice to a legal entity whose details are registered on the company’s PSC register where the company knows or has reasonable cause to believe that those details have changed.

(F) Warning notice advising a person that the company is proposing to issue a restriction notice.

CSP 10.9A Register of People with Significant Control

The SBEE Act introduced a requirement for most companies to keep a Register of People with Significant Control (the PSC register) and to disclose any changes to that register at least annually to Companies House as part of the new annual confirmation process. The requirement to keep a PSC register has effect from 6 April 2016.The new annual confirmation process has effect from 30 June 2016.

The provisions regarding the new PSC register are contained in new Part 21A of the Companies Act 2006, inserted by s. 81 of the SBEE Act and in the Register of People with Significant Control Regulations 2016, [SI number to be inserted](“the PSC Regulations”) (or the Limited Liability Partnerships (Register of People with Significant Control) Regulations 2016 [SI number to be inserted], or the European Public Limited-Liability Company (Register of People with Significant Control) Regulations 2016 [SI number to be inserted]as applicable).

BIS has also issued helpful (non-statutory) guidance for Companies, Societates Europaeae and Limited Liability Partnerships regarding PSC registers, see

The requirement to maintain a PSC register applies to all UK companies except:

(a)those that are subject to the major shareholding notification regime in Chapter 5 of the Disclosure and Transparency Rules (DTR 5 issuers) ‒ this include UK companies traded on the main market of the London Stock Exchange, AIM or the ISDX Growth Market.; and

(b)companies with voting shares admitted to trading on a regulated market in the UK or European Economic Area (other than the UK) or on certain specified markets in Switzerland, the USA, Japan and Israel on the basis that they are subject to transparency rules similar to DTR 5.

Overseas entities operating in the UK might be subject to requirements in their home country but are not subject to the requirement to hold a PSC register. Although these companies are not subject to the requirements to identify and register their PSCs, they might still be required to disclose their ownership or control of companies, SEs or LLPs which have to identify and register their PSCs.

People with significant control

The definition of a ‘person with significant control’ for the purposes of Part 21A is contained in a new Sch. 1A to the 2006 Act inserted by the SBEE Act.

By virtue of that definition, the PSC register will be required to contain details of any individual who:

(a)holds, directly or indirectly, more than 25% of the shares in the company;

(b)is entitled, directly or indirectly, to exercise more than 25% of the voting rights in the company, or to control the exercise of more than 25% of those rights;

(c) is entitled, directly or indirectly, to appoint or remove a majority of the board of directors of the company, or to control the exercise of a right or rights (in aggregate) to appoint or remove a majority of that board;

(d) has the right to exercise, or actually exercises, significant influence or control over the company;

(e) has the right to exercise, or actually exercises, significant influence or control over the activities of a trust or firm that meets any of the above conditions in relation to the company, or would do so if it was an individual.

For further details on the working of this definition, see Chapter 7 of the non-statutory BIS Guidance.

The purpose of the PSC register is not therefore only be to disclose 25%+ share interests. There are a variety of other ways in which a person can be a significant controller. Schedule 1A goes to great lengths to ensure that anyone who actually excises significant control over a company in other ways is caught. It also seeks to anticipate the various ways in which people might try to avoid having to make disclosures (e.g. by having chains of ownership, joint holdings or temporary rights) and attempts to shut them down. This adds complexity to the definition and makes it much more difficult to understand. The SBEE Act requires the Secretary of State to issue guidance on the meaning of a person with significant control – for the statutory guidance which has been issued, see

Relevant legal entity

The main purpose of the PSC register is to disclose the individuals (if any) who exercise significant control. It will not be possible to enter another company in the register as a significant controller unless it is a ‘relevant legal entity’.

Essentially, a ‘relevant legal entity’ is a company that is subject to the same or similar disclosure requirements (so that a person can follow the trail by looking at the disclosures that it has made). Any UK company that is subject to the PSC register requirements in Part 21A is a relevant legal entity. The following issuers are also classed as relevant legal entities:

(a)companies that are subject to the major shareholding notification regime in Chapter 5 of the Disclosure and Transparency Rules (DTR 5 issuers); and

(b)companies with voting shares admitted to trading on a regulated market in the UK or European Economic Area (other than the UK) or on specified markets in Switzerland, the USA, Japan and Israel.

Where a company is owned by several relevant legal entities in a chain, only the first in that chain needs to be entered in the PSC register. This is achieved by distinguishing between non-registrable and registrable relevant legal entities.

An overseas company that has not been designated as a relevant legal entity is notcapable of being entered in the register as a significant controller by any of its UK subsidiaries. Instead, the UK subsidiaries will need to ascertain whether there are any individuals behind its overseas parent who would qualify as significant controllers in relation to itself.

Obligation to notify

A person who is a significant controller of a UK company has an obligation to notify the company of that fact, together with the details that the company must enter about them in its PSC register. The obligation to notify only arises if they have been a significant controller for one month and were aware of that fact (or should have been). Theythen have a further month in which to notify the company (ss. 790G and 790H). Failure to do so is an offence punishable on indictment by up to two years imprisonment or a fine (or both).

Notwithstanding the notification obligations of significant controllers, companies have a general duty under s. 790D(1) to take reasonable steps to find out whether there is anyone who is registrable as a significant controller and, if so, to identify them.

In particular, a company has a duty under s. 790D(2) to give notice to anyone whom it knows or has reasonable cause to believe to be a registrable person or a relevant legal entity in relation to it (whose details have not already been registered), requiring them to state whether or not they are such a person and, if so, to confirm or correct any particulars.

Companies also have a duty to conduct investigations under s. 790E when they have reasonable cause to believe that a change has occurred in the information that should be entered in the PSC register (e.g. where it has reason to believe a person is no longer a significant controller). For precedents for such notices see Precedent 10.D2.

Failure by the company to comply with either of these duties is an offence punishable on indictment by up to two years imprisonment or a fine (or both) for any officer of the company in default.

The duty to give notice to a person under s. 790D(2) only applies where a company has reasonable cause to believe that that person is a significant controller. Section 790D(5) also gives companies power to force other people who might know the identity of any significant controller to make disclosures - for a precedent for a notice requiring such disclosure, see Precedent 10.D2, form (C). Although this is expressed as a discretionary power, companies may need to exercise it in order to avoid being in breach of the general duty in s. 790D(1) to take reasonable steps.

Sanctions companies can impose

New Sch. 1B to the Companies Act sets out the sanctions that a company can impose on a person who has a relevant interest but fails to respond to a notice under s. 790D or 790E from the company. A relevant interest in this context is a shareholding, a right to exercise any votes or a right to appoint or remove a majority of the board.

Before imposing any sanctions, the company must issue the person with a warning notice (see Precedent 10.D2, form (F)). If they do not respond within a further month or do not provide an adequate explanation as to why they have not responded, the company may then serve a restriction notice on them, which has the following effectson the person’s interest:

(a)the interest cannot be sold or transferred and any agreement to sell or transfer the interest is void;

(b)no rights associated with the interest can be sold or transferred and any agreement to sell any such rights is void;

(c)no rights may be exercised in respect of the interest;

(d)no shares may be issued in right of the interest or in pursuance of an offer made to the interest-holder; and

(e)no payment may be made by the company in respect of the interest, whether in respect of capital or otherwise unless the company is in liquidation.

In deciding whether to issue a restrictions notice, the company will need to have regard to the effect it would have on the rights of third parties in respect of the relevant interest. The person who has been served with a restriction notice or any third party affected by it will be able to apply to the court to have the restrictions relaxed or removed. For further details on the procedures and forms relative to sanctions see Chapter 8 and Annex 3 of the non-statutory BIS Guidance.

The PSC register

The requirement to make an entry in the PSC register arises if the company receives a notification or confirmation from a person that they are a significant controlleror no longer such a person, and on any notification or confirmation of a change of details (s. 790M). A company may not make any entry in the PSC register in respect of an individual until all their details have been confirmed (e.g. in a notification or a response to an inquiry). However, a company is required to make anentry in respect of a ‘relevant legal entity’ (e.g. its UK parent company) that is a significant controller as soon as it becomes aware of its status as such, i.e. without necessarily obtaining confirmation.

There is no period of grace for making entries in the PSC register, which means that the information should be entered as soon as it becomes registrable. This has implications for private companies that choose to have their PSC register kept by Companies House as the obligation to notify Companies House will arise at the same time as the obligation to make an entry in the register, with no period of grace allowed.

The particulars required to be entered in the PSC register are largely the same as those required for a director, excluding any former names or their business occupation. Although individuals are required to provide the company with their usual residential address, only their service address will be entered in the public part of the register. The PSC register will also need to record the date the person became or (if relevant) ceased to be a significant controller and the nature of their control over the company.For each person included in the register details must be given of the relevant condition they satisfy requiring their inclusion in the register, i.e. the nature of their control (see above) and quantifying their interest within specified percentage bands, using prescribed wording For an example of a PSC Register showing the details required to be given of any PSC or registrable RLE see Precedent 10.D1.

Any person has the right to inspect the company’s PSC register free of charge and to demand a copy of it on payment of a fee of £12 (s. 790O and the PSC Regulations). However, they will have to explain why they want to inspect or copy the register as this is subject to a proper purposes test. The proper purposes test will not apply if Companies House is keeping the register for a private company or to any information that a company may file as part of its annual confirmation process.

When a person inspects or requests a copy of the PSC register, the company has to inform them of ‘the most recent date (if any) on which alterations were made to the register and whether there are any outstanding entries to be made (s. 790S).

Entries in the PSC register may be removed 10 years after a person ceased to be a significant controller(s. 790T). In addition, the court will have power to order the register to be rectified on an application by an aggrieved person (e.g. somebody whose name has been entered in it but should not have been) or any other interested party (e.g. the company).

Other information to be noted on the PSC register

New ss. 790K and 790M of the Companies Act 2006 set out the information that companies will have to enter in their PSC register about any PSC or relevant legal entity. The PSC Regulations set out additional disclosures that will be required where a company has no PSCs or does not yet have their full details; the regulations set out prescriptive wording that must be included in the register in each case. Companies will not be allowed to make any notes on the register other than the ones required by the legislation.

For an example of the required additional disclosuresand the prescribed wordings, see Precedent 10.D1, sheet (C).

When any statement on the register no longer applies, companies will be obliged to state that fact on the register and give the date on which the circumstances changed.

Disclosure to Companies House

As from 30 June 2016, the entries in the PSC register have to be disclosed to Companies House on incorporation and updated annually as part of the annual confirmation process (the replacement for the Annual Return). If a private company opts to have its PSC register kept by Companies House, it will need to update Companies House of any changes as and when they occur. Companies House will make all the information that a company files available on the public register unless a confidentiality order is obtained.

The annual confirmation will be required to give details of all changes in the register that have occurred during the period. So, if a person was a significant controller for only part of the period, their details would have to be notified. If the Secretary of State does prescribe any additional matters that must be included in the register, these will also need to be notified and updated as part of the annual confirmation (see above).

Protection against disclosure

PSCs will be required to provide the company with their residential address. However, as mentioned above, that address will not appear on the company’s PSC register available for public inspection or the central register kept by Companies House.

Ordinarily, the residential address held by Companies House will only be accessible by specified public authorities and credit reference agencies (CRAs). However, PSCs who feel that they or somebody they live with may be at serious risk of violence or intimidation due to the activities of a company will be able to apply to Companies House to prevent their residential address from being disclosed to CRAs under a procedure similar to the one that applies to directors.

The PSC Regulations also enable PSCs to apply to Companies House to stop all of their PSC information from appearing on any public register.

Protection will be granted only if the individual PSC’s application contains evidence proving a serious risk of violence or intimidation to the PSC or someone who lives with the PSC. There can be exceptions to this evidential requirement where the person on whose behalf the application is being made already has protection in their capacity as a company director, or as a member of an LLP.

If the application is to prevent a PSC’s residential address from being shared with credit reference agencies by Companies House, the risk must come either from the activities of the company(or from another company for which the PSC already has residential address protection).

If the application is to prevent all of a PSC’s information from being made public then the risk must come either from the activities of the company, or must come from the association of the PSC with the company. In respect of the latter, the application must demonstrate that if the PSC ispublicly identified as the PSC of the company, certain characteristics or attributes of that person when associated with your company could put them or someone who lives with them at risk of violence or intimidation. The activities of the company need not be sensitive in and of themselves, but the application must demonstrate that the association with that particular PSC might result in violence or intimidation against that person.