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The register is to be known as the PSC register, "PSC" being an abbreviation of "people with significant control". Not all beneficial owners of a UK company's share capital are caught: only those with "significant control" of the UK company.
The legislation contains 5 conditions of PSC status. If a person meets any one of the conditions, then he or she is a PSC.
Condition 1 is that an individual holds, directly or indirectly, more than 25% of the shares of the UK company.
Condition 2 is that an individual holds, directly or indirectly, more than 25% of the voting rights in the UK company.
Condition 3 is that a person holds the right, directly or indirectly, to appoint or remove a majority of the board of directors of the UK company.
At the time of writing, the fourth condition is egregiously circular. It states that a person with significant control of a company is a person ‘who has the right to exercise, or actually exercises significant influence or control' over the company. The Secretary of State must prepare and publish guidance about the meaning of ‘significant influence or control' and this guidance must be laid before Parliament. Regard must be had to that guidance in interpreting references to ‘significant influence or control' (Schedule 1A, para 20). The government is expected to issue such guidance towards the end of 2015.
The fifth condition is that:
a) the trustees of a trust (or the members of a firm that, under the law by which it is governed, is not a legal person) meet any of the conditions 1-4 above in their capacity as trustees (or as partners of a partnership without legal personality) in relation to a UK company, or would do so if they were individuals, and
b) a person has the right to exercise, or actually exercises, significant influence or control over the activity of that trust (or firm).
The Act does not capture UK limited liability partnerships, but these will be captured in secondary legislation.
The Act does not capture UK limited liability partnerships, but these will be captured in secondary legislation.
A UK company within the scope of Schedule 3 must under new s790D take reasonable steps to determine if anyone is a registrable person or a registrable relevant legal entity for the purposes of the PSC register and, if so, identify them. Pursuant to this, the UK company must give notice to anyone who it knows or has reasonable cause to believe to be a registrable person or a relevant legal entity in relation to it; and if the recipient of the notice confirms this status, then the recipient of the notice must confirm or correct any particulars that are included in the notice, and supply any particulars that are missing.
A UK company issuing notices under s790D may also give notice to a person if it knows or has reasonable cause to believe that the person knows the identity of someone who is a registrable person, or a relevant legal entity1, or if the person knows the identity of someone likely to have that knowledge.
An addressee of a notice has up to one month from the date of the notice to comply with it.
A UK company will also have a duty under s790E to keep PSC particulars up to date, and must issue further notices if it knows or has reasonable cause to believe that a relevant change has occurred in the particulars of a PSC.
The company and every officer of the company in default commits a criminal offence if it fails to comply with the terms of s790D or E.
Schedule 3 of the Act extends new administrative burdens beyond the UK company itself in support of the PSC register.
Section 790G imposes duties on persons who know or who ought to know that they are ‘registrable persons' or ‘relevant legal entities' to notify the UK company of their status in relation to the company, where their required particulars are not stated in the company's PSC register, and such a person has not received notice from the company. Not only is there a duty to supply such information to the company by the registrable person, but there is also an ongoing duty on the registrable person to communicate updated information to the UK company.
Investigative notices served by the company under s790D or E to persons with ‘relevant interests'2 who fail to comply with the notices can lead to enforcement by means of a ‘warning notice', followed, if necessary by a ‘restrictions notice' (Schedule 1B para s1 – 6).
The effect of a restrictions notice is as follows:
a) any transfer of the interest is void
b) no rights are exercisable in respect of the interest
c) no shares may be issued in right of the interest or
in pursuance of an offer made to the interest holder
d) except in liquidation, no payment may be made of sums due from the company in respect of the interest, whether in respect of capital or otherwise.
An agreement to transfer an interest that is subject to these restrictions is void, as is an agreement to transfer any associated right otherwise than in liquidation (Schedule 1B, para 3).
A company's PSC register must be kept available for inspection:
a) at its registered office, or
b) at a place specified in regulations under s1136 CA 2006.
A company must give notice to the Registrar of Companies of the place where its PSC register is kept available for inspection and of any change in that place, but no such notice is required if the register has, at all times since the company was incorporated, been kept available for inspection at the company's registered office (s 790N).
A company's PSC register must be open to the inspection of any person without charge (s790O).
Any person may require a copy of a company's PSC register or any part of it on payment of such fee as may be prescribed.
A person seeking to exercise rights to inspect or copy the company's PSC register must under s790O make a request to the company containing the following information:
a) in the case of an individual, his or her name and address
b) in the case of an organisation; the name and address of an individual responsible for making the request on behalf of the organisation
c) the purpose for which the information is to be used, and
d) whether the information will be
disclosed to any other person, and if so
i) where that person is an individual, his or her name and address
ii) where that person is an organisation, the name and address of an individual responsible
for receiving the information on its behalf and
iii) the purpose for which the information is to be used by that person
Where a company receives a request to inspect or copy its PSC register, it must within 5 working days either:
a) comply with the request, or
b) apply to the court.
If the company applies to court, it must notify the person making the request. If the court is satisfied that the inspection or copy is not sought for a "proper purpose", it must direct the company not to comply with the request and it may further order that the company's costs on the application be paid in whole or in part by the person who made the request.
If the court makes such a direction and it appears to the court that the company is or may be subject to other requests made for a similar purpose (whether made by the same person or different persons) then it may direct that the company is not to comply with any such request.
However, if on an application the court does not direct the company not to comply with the request, the company must comply with the request immediately upon the court giving its decision.
A criminal offence is committed by the company and every officer of the company where an inspection or copy request is made to the company and it is refused without a supporting court order.
Various criminal offences are committed by a ‘searcher' of the PSC register if such a person knowingly or recklessly makes a request for inspection or a copy of the PSC register and the request contains a statement that is misleading, false, or deceptive in a material particular (s 790R).
It is also an offence for a person in possession of information obtained by inspection or copying of a UK company's PSC register:
a) to do anything that results in the information being disclosed to another person or
b) to fail to do anything with the result that the information is disclosed to another person – knowing or having reason to suspect that the other person may use the information for a purpose that is not a proper purpose.
As an alternative to the UK company maintaining its own PSC register at its registered office (or other designated UK address) a company may elect to keep the information required to be entered on the PSC register with the Registrar of Companies on a ‘central register'. The Central Register is unconditionally open to inspection by the public.
Such an election does not in any way exonerate the company from its investigative and information gathering duties in relation to its PSCs, nor on the PSC's reciprocal obligations to the company.
The alternative regime involving the Central Register does not exonerate a UK company from filing details of its PSCs (if any) on incorporation to the Central Register. Therefore, if the UK company does not elect to keep its PSC records on the Central Register, it will have to maintain its own PSC register, and file the up-to-date contents of its PSC register on incorporation and annually to the Central Register.
In any event, UK companies in existence on 6th April 2016 must create a PSC register in advance of the launch of the central register on 30th June 2016.
This includes the name of the PSC, his or her country or state of residence, nationality, date of birth (although the day of birth will be suppressed as an anti-fraud measure), service address, the date on which the person became a PSC, and the nature of the PSCs control over the UK company.
Planning will require beneficial owners to disengage themselves from significant control of the UK company. This suggests that the use of trusts to own UK companies will become prevalent among the small minority of beneficial owners who require legitimate confidentiality. Other measures involving option agreements and split share capital arrangements also suggest themselves. However, these measures will require advice from a UK corporate lawyer.
Although, in a perfect world one should wait for statutory guidance on condition 4 (the broad-brush or "sweeping up" condition) and condition 5 of PSC status before implementing any protective measures, as well as waiting to see what the statutory protection regime the government will offer to PSCs at "risk of serious harm" from disclosure looks like (but this is likely to be too uncertain or narrow in scope to be practicable), PSCs utilising nominee shareholders for legitimate reasons will wish to act well before the deadline for the implementation of the PSC register (currently April 2016) and the Central Register (currently June 2016), in order to restructure for ongoing confidentiality.
1 - A relevant legal entity is a company either itself subject to the Act's disclosure requirements, or is a DTR 5 issuer, or is of a description specified in regulations.
2 - i.e. shares or voting rights in the UK company or the right to appoint or remove a majority of the UK company's directors.