Persons of Significant Control ("PSC") Register Regime
On 6 April 2016 the new Part 21A of the Companies Act 2006 came into force. It requires all UK incorporated Companies (that are not exempt) and Limited Liability Partnerships to keep a register of individuals and certain legal entities with "significant control" over them.
The 5 conditions for control are any one or more of:
- Holds, directly or indirectly, more than 25% of the shares in the company;
- 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 of directors of the company;
- Has the right to exercise or actually exercises, significant influence or control over the company;
- Has the right to exercise, or actually exercises, significant influence or control over the activities of a trust or firm that is not a legal entity, which would itself satisfy any of conditions 1 to 4 in relation to the company if it were an individual.
From a banking perspective, this register regime is far more important than a standard requirement to keep a register of directors and members.
The key issues are as follows:
- Security may not be taken or enforced over shares in a company where the PSC regime has not been complied with and a restriction notice has been issued;
- A security agent may be subject to the PSC register regime (unless covered by a carve-out for security over shares);
- Lenders may be subject to the PSC register regime (unless they covered by a carve-out for financial agreements);
- Failure to comply with obligations under the PSC regime is a criminal offence
The register must be updated on an ongoing basis and kept at the companies registered office or (in the case of a private company) at Companies House. From 30 June 2016 all companies have been required to file their Confirmation Statement (replacing the Annual Return) in order to maintain a PSC register in accordance with the regime.