Draft regulations published on detailed aspects of new register of persons having significant control

The Department for Business, Innovation and Skills has published a consultation paper and draft regulations on various detailed aspects of the register of persons having significant control, or PSC register, that UK-incorporated companies will be required to maintain from January 2016 under the Small Business, Enterprise and Employment Act 2015.

The consultation seeks views from interested parties on:

  • companies that should be exempt from the requirement; 
  • the information to be recorded on the PSC register;
  • the regime for the protection of those at serious risk of violence or intimidation;
  • the system of notices and sanctions for those who fail to respond to questions from a company trying to establish who their PSCs are; and
  • the fees that a company can charge to provide copies of a register entry.

BIS is seeking views separately on the application of the PSC register requirement to Limited Liability Partnerships and UK Societas Europaea and how foreign limited partnerships and corporations sole (which include Governments) should be treated if they own or control a UK company. There will also be further consultations in 2016 in respect of adapting the regime to meet the requirements of the EU Fourth Anti-Money Laundering Directive (which requires all EU Member States to hold central registers on beneficial ownership of certain undertakings from 2017).

BIS also indicates in this paper that the ban on corporate directors being introduced under the Act will take effect in April 2016, rather than October 2015 as previously stated.

Background

From January 2016, UK companies will be required to maintain a register of persons having significant control over them. From April 2016 this information will have to be provided to Companies House when companies deliver their annual confirmation statement (which replaces the annual return) and will be recorded on a searchable central public register. These requirements were introduced as part of the UK’s commitment to enhance transparency about company ownership. A full briefing on the Act is available to subscribers on the Linklaters Knowledge Portal, here. BIS intends to publish detailed guidance for companies in the autumn.

Additional exemptions

It is proposed that companies with voting shares admitted to trading on an EEA regulated market will be exempt from the requirement to maintain a PSC register, on the basis that these companies already disclose detailed information about their ownership under the EU Transparency Directive. There is already an exemption under the Act for companies that comply with DTR 5 (i.e. those listed on the Main Market of the London Stock Exchange or on AIM) so this additional exemption would benefit UK-incorporated companies listed on a regulated market elsewhere in the EEA. Other questions are posed as to whether any other companies should be exempted, such as those listed on other, non-EEA, markets.

Information to be recorded on the PSC register

The PSC register must record the nature and the extent of control of each PSC. It is proposed that companies will be required to show which of the five criteria for being considered a PSC is satisfied by the PSC in question:

1.     directly or indirectly owns more than 25% of the shares in the company;

2.     directly or indirectly holds more than 25% of the voting rights in the company;

3.     directly or indirectly has the power to appoint or remove the majority of the board of directors of the company;

4.     otherwise has the right to exercise or actually exercises significant influence or control over the company (as will be defined in statutory guidance which has not yet been published); or

5.     has the right to exercise or actually exercises significant influence or control over a trust or firm that is not a legal entity which in turn satisfied any of the first four conditions over the company.

Where the nature of control is the holding of shares or voting rights (including via control of a trust or firm), it is proposed that companies should record whether the amount held is 25-50%, 50-75% or 75-100%. This is intended to be less burdensome for companies than providing (and having to update) exact percentages whilst still providing sufficient transparency over the extent of control.

There are also proposals as to what companies should note on their PSC register if there is no PSC or if they believe that there is one but have not been able to confirm the details.

Fees for providing copies of register entries

There are two proposed options for the fees companies may charge to those requesting copies of entries on the PSC register. The first option is a fee proportionate to the number of entries requested and the second is a fixed fee that applies irrespective of how many entries are requested.

Protection regime

PSCs will be able to apply to have some or all of their information withheld from the public register or from being shared with credit reference agencies if they believe that they or someone they live with are at serious risk of violence or intimidation due to the activities of the company, either alone or when taken together with a particular characteristic or attribute of the PSC.

The residential addresses and full date of birth of all PSCs will be kept on a company’s own PSC register but not disclosed on the public register (although that information would be available to public authorities and credit reference agencies).

In addition, PSCs will be able to apply to Companies House from January 2016 either to prevent their residential address from being disclosed to credit reference agencies (as company directors can do currently) or to stop all of their PSC information from appearing on any public register. If an application is made, information on that PSC will be kept off the public register until the outcome of their application and any appeal.

Warnings and restrictions notices

The Act introduces a regime for companies to serve notices on those who they think should be recorded on their PSC register or who might have knowledge about such persons. If there is no response to such a notice within one month, the company may send a warning notice. If there is still no reply after a further month and no valid reason for non-compliance has been provided, the company may issue a restrictions notice. The restrictions notice can impose restrictions on the shares and rights in question, such that no interest can be sold, no rights can be exercised or transferred and no benefits, such as dividends, can be received.

The consultation relates to the proposed mandatory content of the warning and restrictions notices and the valid reasons for non-compliance, which it is proposed should be limited to incapacitation.

Responding to the consultation

BIS requests responses by 17 July 2015. Click here for the consultation paper and draft regulations. Click here for the response form.

In addition, anyone interested in contributing to the discussions about the application of the requirement to maintain a PSC register to LLPs and UK SEs, or the treatment of foreign limited partnerships or corporations sole (including governments or government departments, international organisations and local authorities) which own or control UK companies, should contact the Transparency & Trust team at BIS (transparencyandtrust@bis.gsi.gov.uk).