If you run a company in the UK, you have probably heard mention of the introduction of the new register of People with Significant Control (PSC). Will these changes impact you and your business? Read ahead to learn more and find out exactly what you need to know to stay on the right side of the law.
New PSC Law
A PSC is any individual who holds at least 25% of the shares or voting rights in a company, can control the composition of the board or otherwise has, directly or indirectly, significant influence or control over the company. The Small Business, Enterprise and Employment Act of 2015 ruled that new changes will come into place on June 30, 2016. These new rules are designed to increase trust and transparency in the UK business world by making public the details of the people that control each UK company.
This transparency is part of a wider international initiative taking place across the EU, including the Fourth Money Laundering Directive. This Directive mandates that all corporate entities disclose this information by June of 2017, and so the new PSC laws aim to meet these requirements in advance.
Under the new UK rules, companies must keep a register of all PSCs, and must include details (including name, birthdate, nationality and address) in their annual confirmation statement with Companies House from 30 June 2016. Criminal penalties can be levied against companies, their officers and/or the PSCs if they do not comply. More information can be found on the official Gov.UK site.
Three simple tests to determine who is a PSC
Using three basic measures, you can determine if an individual (or yourself) has significant control over your company.
- They hold or control more than 25% of the companies shares
- They hold or control more than 25% of shareholder rights
- They have a right to appoint (or remove) a majority of its board of directors (or similar).
In addition to these three measures above, an individual can also meet these requirements if he or she indirectly meets the requirements by owning the shares in another company (or a chain of companies) that holds the shares in question. This means that the owner of a company that holds more than 25% of your company’s shares as an investment is considered a PSC in your company. You may have never met them, and they may not even realise they are connected to your business, but under these new laws you must disclose their information.
Two broader criteria for PSC
There are two other, broader tests that you can apply to your business in order to determine who is a PSC.
- A person who has “significant influence or control” over your company
- A person who has “significant influence or control” over a trust, partnership or other company that has controlling interest in your business.
Based on Government guidance, the meaning of the phrase “significant influence or control” refers to the instance when a person has “control” over an organisation and can direct or heavily influence policies and directives, and can ensure that the organisation does the things that they wish.
Does your organisation need to keep a PSC register?
The new rules will only apply to unquoted UK companies, limited liability partnerships (LLPs) and Societates Europaeae. If your company is quoted, you will not have to maintain a PSC register, because your significant investors will already be on public record.
What must your company and your PSCs do?
As the business owner, you must take reasonable steps to both identify your PSCs and keep an up- to-date register of their details. The PSC must confirm their details to your company by completing an information request. Once they do, you will need to compile their data and submit it along with your annual confirmation statement to Companies House.
What details must be registered?
Once an individual has confirmed that he or she is indeed a PSC for your company, you must record their name, residential address, service address, date of birth, nationality, country of domicile and the nature of their influence or control over your company.
The PSC Register – Open to the public
As of June 30, 2016 any member of the public will have the right to inspect a company’s PSC register, providing they have a proper purpose.
Can you keep any information confidential?
For many small business owners, this question is one of key concern. Do note that the residential addresses of PSCs will be kept from the general public, and the day of their date of birth will also be kept private. If you have a situation in which releasing your PSC’s information could put them at risk of violence or harm, you can apply to Companies House to protect the information.
Non-compliance is a criminal offence
Remember – this is nothing to trifle with or “leave until next year.” If you are required to submit PSC statements then you must submit these on time each year. Failure to do so can include up to two years in prison or a hefty fine.
What actions should you take now?
If you have not already done so, then you should immediately start the process of establishing the identities of your company’s PSCs – while this will probably be straightforward, there are many instances in which it can get confusing. For instance, if an unquoted overseas company has more than a 25% interest in your business, you will need to do some detective work and track down the individuals with a majority stake in that company. This can be a lengthy chain – so it is best to start as soon as possible.
All companies should have started to identify their PSCs from April 6th, so if you have been having problems acquiring information you should note this status and seek further guidance from Companies House.