Do you have an investment in a UK corporate or have a UK subsidiary in your group? If so, from 6 April 2016, your details – or your investors’ details – may have to be listed on the UK’s “people with significant control” (PSC) register. Here are 10 things you need to know about the new PSC register regime.
1. Every UK company will have to keep a PSC register. And so will every limited liability partnership (LLP). This includes wholly-owned subsidiaries and dormant companies. The only exception is for UK companies listed on certain stock exchanges. A branch office (known as a UK place of establishment) is not a UK company and will not need to keep a PSC register.
2. The register will reveal the people who ultimately own or have “significant control” over the company or LLP. The new regime is intended to increase corporate transparency with the policy aim of combatting money laundering, terrorist financing and tax evasion.
3. What is “significant control”? It’s complicated! Anyone who holds, directly or indirectly, more than 25% by nominal value of a company’s issued share capital or more than 25% of the voting rights in a company will qualify. So will anyone who controls the majority of board appointments and removals and anyone who has the right to exercise or actually exercises significant influence or control over a company (e.g. through contractual arrangements). There are specific provisions relating to indirect holdings through chains of entities, trusts, joint interests and arrangements, nominee arrangements, interests held by way of security and limited partnership interests. A company or LLP may have multiple people with significant control over it or it may have none.
4. The nationality or residence of the people with significant control is immaterial. If someone has significant control over the UK company or LLP, then they will be registrable regardless of their own nationality or place of residence.
5. The register will record identifying information. As well as the individual’s name, service and residential address, country of residence, nationality, date of birth and date on which they became a PSC, the register will record how the person qualifies as a PSC. If the individual holds their interest through an entity which itself has to keep a PSC register or through a company listed on certain stock exchanges (including NASDAQ and the NYSE), information about that entity will be recorded instead of information about the individual. This stops duplicate information having to be recorded but still allows beneficial ownership to be tracked through chains of entities.
6. The register will be public. Each register will be open to public inspection. And, from 30 June 2016, the information on it will have to be filed at the UK’s Companies House and will be freely available online – although the residential address and day of birth will be supressed. You can only apply to keep PSC information private if publicly revealing your connection would put you or your family at serious risk of violence or intimidation.
7. Failure to comply is a criminal offence. Every company and LLP will have a duty to take reasonable steps to identify the people it knows or suspects to have significant control over it. It will do this by sending notices asking for information from the registrable people themselves or from anyone else who it thinks has the necessary information. There will also be a duty on someone who has significant control to tell the company or LLP and provide it with the necessary information. Failure to comply could result in prosecution of the company’s directors, company secretaries and PSC(s) with a liability on conviction to a maximum of 2 years imprisonment.
8. The register cannot be blank. There are various specific holding statements which will go on the register while a company or LLP is investigating its PSC register information or if it cannot obtain the information it needs.
9. If a person doesn’t provide their information, their interest in the company/LLP could be frozen. Companies and LLPs will be able to serve a “restrictions notice” on someone who fails to provide information when asked. Shares which have a restrictions notice applied to them cannot be transferred, cannot be voted (and cannot exercise any of their other rights) and cannot receive dividend or capital payments (other than on a liquidation).
10. Osborne Clarke LLP can help. We can help your UK entities comply with their obligations and also advise US investors and US corporates on their PSC status. Please contact Steve Wilson or your usual Osborne Clarke LLP contact.