Register of People with Significant Control

Michelle Garlick looks at the Register of People with Significant Control and how to ensure compliance with this new obligation.

60 seconds with Michelle Garlick, Partner

Michelle, I understand that there is yet another Register that we now need to keep called the Register of People with Significant Control. What is it?

That is correct. As from 6 April 2016, companies and LLPs (with only very limited exceptions) will be required to hold and keep available for inspection a register of people with significant control over the company/LLP (“PSC Register”).

This is a major administrative change which will apply to the vast majority of UK companies and LLPs. Directors and Company Secretaries will need to acquaint themselves with the new rules and consider how they will apply as soon as possible.

Why is the PSC Register being introduced?

The measures are being brought in to further increase the visibility of those in control of UK companies and LLPs, and to deter and penalise those controllers who seek to disguise their interests.

So what do we need to do to comply with the regime?

In summary, the obligations are to investigate, obtain and keep updated information on registrable persons and relevant legal entities with significant control over the company. A PSC register will need to be created which needs to include "required particulars” of each person with significant control over the company who is a registrable person.

It will be necessary to take reasonable steps to find out if there are people who have significant control over a company/LLP, make contact with them to confirm whether they meet one or more of the conditions and, if they do, obtain the relevant information to include on the company’s PSC register.

The PSC register will also need to be monitored, updated when necessary and reviewed at least annually so add this to your calendar of monitoring of policies/procedures etc.

So who might need to be included on the PSC register in a law firm?

This will not necessarily be obvious or straight forward.

A person with significant control (and who will need to be included on a company’s PSC Register) is defined in the Act as a person who directly or indirectly:

  1. holds more than 25% of the company’s shares; or
  2. holds more than 25% of the company’s voting rights; or
  3. has the right to appoint or remove a majority of the company’s directors; or
  4. has the right to exercise, or does exercise, significant influence or control over the company; or
  5. has the right to exercise, or does exercise, significant influence or control over the activities of a trust, and that trust meets one or more of the above four conditions.

Individuals who would fall into the fourth “significant influence or control” category stated above will include individuals with rights to:

  • adopt or amend the company’s business plan;
  • change the nature of the company’s business;
  • incur further company borrowings; or
  • establish or amend any share or other incentive schemes.

Other individuals would be regarded as actually exercising influence or control if:

  • they regularly or consistently direct or influence a significant section of the board of directors, or they are regularly consulted on board decisions; or
  • their recommendations are always or almost always followed by shareholders who hold the majority of voting rights.

What if we are unable to identify anyone to be included on the PSC register? Presumably we do not have to do anything then?

Wrong! You still need to have a PSC register which states that you have not identified any registrable person. Even whilst you are investigating, you should have standard wording in your register stating that you have not yet completed taking reasonable steps to find out if there is anyone who is a registrable person/legal entity! There is standard wording in the guidance issued by the government. View the guidance.

So what are the penalties for failure to comply with the regime?

In summary, failure to comply with the new regime is a criminal offence by individuals, relevant legal entities, the company and every officer in default. This is punishable by a fine or up to two years in prison.

I need help! Where can I get it?!

We have created a template PSC register to help you together with more detailed guidance. To receive a template register and detailed guide please fill in the form below.

We can also help you to investigate who might be a PSC and help you complete the forms. Please visit our website or get in touch with one of our team if you need further assistance.

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