One of the major changes to the administration of companies in the UK is coming in via the Small Business, Enterprise and Employment Act 2015 (the Act) which will introduce the requirement for a company to create a public register of individuals who hold significant control of the Company or “People with Significant Control” (PSC). The changes brought in by the Act will create greater transparency in respect of companies in the UK.
The Act defines a PSC as anyone who meets one (or more) of the following conditions:
- owns more than 25% of the company’s share;
- owns more than 2% of the company’s voting rights;
- has the right to appoint or remove a majority of the board of directors;
- has significant influence or control over the company; or
- has significant influence or control over a trust of firm (in the case of shares held by trustees or a trust or by members of a partnership).
Guidance currently suggests a person will have “control” of a company or of the activities of a trust or firm if they have the power to direct its policies and activities.
A person will have “significant influence” if they can make the company adopt policies or activities which are desired by the holder of the significant influence.
The PSC Register
The PSC register must contain the following information on People with Significant Control:
- in the case of an individual, his name, service address, country or state of usual residence, nationality, date of birth and usual residential address (usual residential addresses are protected and won’t be placed on any public register);
- the date on which a person became a registrable person or registrable relevant legal entity and the nature of his or its control.
The government has stated that it intends to issue regulations that require companies to include the following on the PSC Register:
- which one or more of the specified conditions for being a PSC (as set out above) the PSC meets; and
- the percentage level of interest (such as between 25-50%, more than 50% to 75% or 75% or more) that the PSC holds.
Failure to comply with the Act
Firstly, a company may impose sanctions on its PSCs if they do not comply with their obligations under the act, such sanctions include e.g. loss of voting rights and transfer restrictions.
Criminal sanctions may apply to those that breach the rules, this can include the company, its directors, secretary and PSCs.
What a Company should do to move forward
The company must obtain and update the necessary information about PSCs and keep this in a register, on an ongoing basis.
Companies must check for signs of changes in control among their shareholders.
You should consider the following:
- the identity of your current PSCs;
- whether your PSC register should be held at your registered office or at Companies House;
- what checks you should have in the future to ensure all PSCs are identified in the future.
Acting swiftly now, and creating a PSC register now would be a sensible way to reduce risk of non-compliance and avoid sanctions.