The people with significant control (PSC) register regime, which will apply to companies from January 2016, is to be extended to include limited liability partnerships (LLPs) from January 2016 as well, according to the latest Government consultation.
The PSC register
The PSC register is a new compulsory corporate register which will name, and contain information on, individuals who directly or indirectly own or control more than 25% of a company’s shares or voting rights, or who otherwise have the ability to exercise “significant control” over the company or its management. For more on the PSC register, see our collection of articles here.
The Government will be consulting on what modifications should be made to the PSC regime so it fits the specific characteristics of an LLP (for example, how will control over voting rights in an LLP be determined?). The analysis will become clearer over the coming months as the Government publishes secondary legislation and statutory guidance on the “significant control” test, which is expected to be finalised by October 2015. No drafts of that legislation or guidance have yet been published.
Treatment of foreign members
Where a “person with significant control” of a company or LLP is a foreign member, the PSC register is only intended to capture people who have the ability to control the management of that LLP (such as a general partner). The Government will be setting out the characteristics of those foreign limited partners who will NOT need to be registered as a PSC in yet to be published regulations.
The EU’s beneficial ownership register
By introducing the PSC register the UK has been leading the way on this issue, with similar moves now put in motion at EU level as part of the 4th Money Laundering Directive (4MLD).
However, in contrast with the UK PSC register which will be open to public inspection and be searchable online via Companies House from April 2016, the EU’s beneficial owner register will only have to be available to “competent authorities and financial intelligence units” without restriction. Entities which are obliged to carry out customer due diligence will also be able to access the register. Anyone else will only be able to access the register if they can demonstrate a “legitimate interest” in suspected money laundering, terrorist financing and related offences such as corruption, tax crimes and fraud (for example, an investigative journalist or NGO). These are minimum requirements: member states will be able to go further if they wish, as the UK has done with the PSC register.
A further key difference is that the UK PSC register only applies to companies and LLPs, whereas the 4MLD covers all corporate and other legal entities. As a result of the UK’s implementation of the 4MLD, the PSC register regime will be extended to Scottish LPs and other types of UK legal entities from June 2017. The Government plans to consult on this next year.
Implications for fund managers
So, fund managers will now need to consider the impact of this legislation on both their own and their funds’ structures where these involve either LLPs or Scottish LPs. The requirement to create and maintain a PSC register will, at the least, be an additional administrative burden and may make information publicly available which they had been happy or preferred to keep private. The Government has confirmed that individuals will only be able to apply to have their information kept off the public register when they are at serious risk of violence or intimidation. Individuals who wish to maintain their privacy will need to put measures in place in advance of the January 2016 and June 2017 implementation dates.