From April 1 2016 most UK companies and LLPs are legally required to identify and record the details of anyone who has significant control over them, known as a PSC (Persons with Significant Control) Register.
The new requirement was part of the Small Business, Enterprise and Employment Act 2015 and covers all UK private and public companies that do not already report such details under the transparency directive DTR 5.
The requirement covers both individuals and “entities” that own or control more than 25% of a company’s shares or voting rights and who could therefore exercise control over the company and its management.
Persons with significant control are defined as those who meet one or more of five conditions:
- directly or indirectly owns more than 25% of shares in the company;
- directly or indirectly holds more than 25% of the voting rights in the company;
- directly or indirectly has the power to appoint or remove the majority of the board of directors of the company;
- otherwise 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 a trust or firm that is not a legal entity, which in turn satisfies any of the first four conditions over the company.
Although it was introduced primarily to promote greater corporate transparency as part of efforts to tackle the problem of money laundering, it has essentially made the disclosure of shadow directors a legal requirement.
Due diligence and a second deadline to note
It will be particularly useful for anyone doing due diligence as the records must be available at its registered office for public inspection and the information includes the names of individuals, their date of birth, nationality, address, and details of their interest in the company. The legislation requires companies to take all “reasonable steps” to identify PSCs and to give notice to those it has reasonable cause to believe should be registrable.
Companies must keep this information up to date and like the requirement to file an annual return, the information held by Companies House must be updated at least every 12 months.
Failure to keep accurate PSC Registers, and from July 1 2016 and to file them with Companies House, will incur legal penalties which range from a fine and up to two years imprisonment.
The noose is tightening on those who want to hide their real intentions.
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