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People With Significant Control - Is Your Business Compliant?

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The Small Business, Enterprise and Employment Act 2015 (SBEE 2015) is now in force with the remit of creating a greater sense of corporate transparency, making companies more accountable and also making it easier to determine who actually runs, controls and manages companies.

As of 6 April 2016, all private limited companies based in the UK are now required to maintain a register of persons with “significant control” (PSCs) over the company – the “PSC register”. In addition, from June 2016, a company’s PSC register must be made publicly available and must be included in the company’s annual confirmation statements – which replace the current annual return.

PSC Register

The introduction of the PSC register is effectively the first step in making the ownership and control of UK companies more transparent and, although there are some provisions that allow material to be withheld from the public, PSCs must provide the relevant information to enable the collation of the register.

What Constitutes A PSC?

A PSC is an individual or relevant legal entity (RLE) that satisfies one of the following conditions:

  • Holds, directly or indirectly, more than 25% of the shares in the company (calculated by reference to nominal value);
  • Holds, directly or indirectly, more than 25% of the voting rights in the company;
  • Holds the right, directly or indirectly, to appoint or remove a majority of the board; or
  • Exercises, or has the right to exercise, significant influence or control over the company (including through a partnership or trust).

The new rules state that all PSCs and RLEs are registerable unless they are specifically defined as specifically non-registerable.

Sanctions For Non-Compliance

The penalties for failure to comply with the new requirements are essentially split into two levels:

  1. A company can impose sanctions on a particular PSC who fails to comply with their respective disclosure obligations; including the removal of voting rights or transfer restrictions without seeking assistance from the court. Similarly, all shareholders must provide the required information to the company or face criminal conviction, punishable with either a fine or imprisonment for up to two years.

 

  1. If the company, its directors, secretary or PSCs do not comply with the requirements then criminal penalties can also be imposed; and it is no defence for the company or any of its officers or shareholders to claim that the breach of the provisions was either inadvertent or an oversight.

 

Next Steps

Companies should act now in order to ensure they are compliant by following the steps outlined below:

  • Identify those individuals and entities which have significant control of your company;
  • Notify them via a notice advising them that they have one month to provide a response;
  • Obtain the required registrable information from them;
  • Submit the relevant information to Companies House as part of the new company Confirmation Statement;
  • Maintain the PSC register and ensure that it remains available for public inspection; and
  • Update the PSC register as and when necessary.

 

If you have any concerns in respect of the new legislation and how it will affect your business please don't hesitate to get in touch with me.

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