New Statutory Register introduced under Small Business, Enterprise and Employment Act 2015 (SBEE) – Part Two
Whether you are a company or an individual shareholder in a company this new legislation will affect you. This is our second article relating the Register for People with Significant Control (PSC Register).
Our first article discussed the PSC Register, the meaning of significant control and the distinction between registrable or non-registrable persons. This article will look at the statutory duty to investigate and gather the requisite information, the data that must be recorded in the PSC Register and when these requirements are expected to come into force.
Question – Who is responsible?
It is the duty of the company to keep the PSC Register and to investigate, obtain and update information on persons with significant control.
The company must:-
- take reasonable steps to find out if there are any registrable individuals or relevant legal entities (RLEs) and identify them;
- give notice to anyone it has reasonable cause to believe is registrable and require those individuals or RLEs to supply or confirm the information requested; and
- give notice to a registrable individual or RLE if it believes that they have ceased to be a registrable person or have changed their particulars (e.g. moved house) to provide confirmation of that change.
The company may also:-
- give notice to a person (who is not thought to be a registrable PSC) requiring them to supply or confirm relevant particulars, if the company knows or has reasonable cause to believe that such person either knows the identity of a registrable PSC or is likely to have such knowledge.
A criminal offence will be committed by the company and every officer in default if the company fails to take the necessary steps or give the requisite notice.
Question – How do I identify who might be a Person with Significant Control?
For most companies, the Register of Members is a good place to start. As you know, this is an existing statutory register which (in addition to any historic information) should set out who the current members are, together with their current postal address and their shareholdings (class and number of shares). From this you should be able to work out who, if anyone, holds more than 25% of the issued shares. The Register of Members may well indicate whether shares are voting or non-voting, indicating whether anyone holds more than 25% of the voting rights. For clarification, members mean shareholders in a company limited by shares or guarantee members in a company limited by guarantee. As mentioned in the previous article, however, the Register of Members is not definitive for these purposes: you will still need to seek confirmation as to whether the legal owners of such voting shares are indeed PSCs – if they are not beneficially entitled to the shares (e.g. because they are held subject to a declaration of trust), or if they have agreed to vote in accordance with someone else's instructions, the real PSCs will be those with the underlying beneficial ownership and/or wielding the genuine control.
In terms of the other types of 'influence or control', the directors of a company should know whether there is a person or legal entity with significant influence or control over the company, or who has the ability to appoint or remove the majority of the board of directors. Documents such as the articles of association or shareholders' agreements amongst others may assist but again as previously stated, these should only be considered as a useful starting point for investigations, not the definitive position (which may not be recorded in writing).
Question – What information do I need to collect from a Person with Significant Control?
In all cases, the PSC Register must contain details of the date on which a person became a PSC (or, in the case of a RLE became registrable) and the nature of his or its control. Beyond this, in the case of an individual, you will need:-
- their full name;
- service address (which does not need to be a residential address or in the UK but you will need the permission of any business at that address);
- country/state of residency (the country where the PSC resides);
- date of birth; and
- usual residential address and details of any restrictions on using this address (mentioned below),
and in the case of registrable RLE you will need:-
- the corporate or firm name;
- the registered or principal office address;
- the legal form of the entity and the law by which it is governed; and
- if applicable, the register of companies in which it is entered.
Question – Will information about the type of control be required as well?
Yes it will. The nature and level of control must be entered in the PSC Register. The regulations state that the PSC Register must include which one of the conditions for being a person with significant control are met.
Question – Will the PSC Register need to be kept up to date if circumstances change?
Yes, absolutely. As with all statutory registers, the PSC Register must be kept up to date and it is an offence not to do so.
If the company becomes aware over time that an individual or legal entity may have changed their particulars (such as moved house or office) or that there has been change in the significant control (e.g. some shares may have changed hands, legally or beneficially) the company must give notice to the relevant person to ensure that the information on the PSC Register is kept up to date. The company must give the notice as soon as reasonably practicable after it learns of the change or first has reasonable cause to believe that the change has occurred. (Please note there is an exception to this requirement to give notice which applies when the company has already been given the information by the individual or legal entity).
Question – Do PSCs have a duty to supply information?
Yes they do. Persons who know or ought reasonably to know that their details should be on a PSC Register are obliged to give their details to the relevant company. Furthermore, they are obliged to provide this information even if the company does not ask for it. They should also ensure that the details are up to date. It is a criminal offence to fail to supply this information, or to knowingly or recklessly supply incorrect information. Additionally, failure to respond to a company's request for information, may entitle the company to place restrictions on certain of its shares, which could have draconian consequences. This topic will be covered in more detail in our third and final article in this series.
Question – Will all this information be publicly available?
No; not all the information on a PSC register will be publicly available. Limited information from the PSC Register will be on the annual Confirmation Statement – the document being introduced to replace the current Annual Return. As with directors, where a service address is given, it will be this service address that is placed on the public part of the register. The residential address will be protected information. Also, as with a director, the day of the date of birth will also be protected.
If a PSC feels that they or somebody they live with would be at serious risk of violence or intimidation, it will be possible to apply to Companies House to omit material from the public register. The procedures for doing this are expected to be along similar lines to those currently available for company directors (who are already able to apply for this level of protection).
The required particulars of an individual must not be added to the PSC Register until they have been confirmed. Information on a registrable RLE does not need to be confirmed in the same way as for an individual but it must be accurate.
Question – Where must the PSC Register be kept?
The PSC Register must be kept with the company's other statutory registers. In accordance with the changes introduced by SBEE in relation to statutory registers, there will be an option to keep the PSC Register (along with the other statutory registers) in full on the public register at Companies House, although this will require the unanimous approval of the shareholders or members. It should be noted that this could make information which otherwise would be protected, public, which is why unanimous approval is required. Even so, it will be the company's responsibility to ensure that only service addresses are on the record and dates of birth are kept separately.
Question – When does this part of SBEE come into force?
Current Government guidance states that companies must maintain a PSC Register from 6 April 2016. Companies will therefore need to collate this information as soon as possible and may wish to consider the steps they need to be taking. From 30 June 2016 onwards, the information on the PSC Register will need to be filed at Companies House when a company files its Confirmation Statement. Looking ahead to the summer of 2017, the expectation is that there will be an ongoing obligation to notify Companies House of changes to the PSC Register, even if they occur in between Confirmation Statement filing dates. Further details of this are awaited, but it could mean that information regarding changes to a company's ownership need to be published each time they occur, rather than just annually as is the case presently.
Question – What happens with new incorporations?
The information required for the PSC Register will become part of the incorporation process from 30 June 2016 and will be one of the statutory registers that will be required to be kept from the start of a company's life.
We will complete our series of articles on the PSC Register with our third article which looks at what happens if information is not forthcoming from suspected PSCs.