The PSC Regime
Since the PSC regime was introduced on 6 April 2016, unlisted UK companies and limited liability partnerships (“LLPs”) have been required to identify individuals who have significant control over the company or LLP and to publicly disclose their details in a separate company register (“PSC Register“).
With effect from 26 June 2017, the regime for investigating and recording information about people with significant control (“PSCs”) over companies and other entities was extended and enhanced to comply with the European Fourth Money Laundering Directive ((EU) 2015/849) . These changes have been introduced into UK law by The Information about People with Significant Control (Amendment) Regulations 2017 (“Regulations”).
Who is a PSC?
A PSC of a company is someone who satisfies one or more of the following five criteria in relation to it:
- Holding, directly or indirectly, more than 25% of the shares.
- Holding, directly or indirectly, more than 25% of the voting rights.
- Holding, directly or indirectly, the right to appoint or remove directors.
- Having the right to exercise, or actually exercising, significant influence or control over the company.
- Having the right to exercise, or actually exercising, significant influence or control over the activities of a trust or firm which is not a legal entity and which meets any of the above conditions.
There are equivalent requirements to establish who is a PSC of an LLP.
BIS has published some useful, albeit not comprehensive, guidance on the meaning of “significant influence or control”. The guidance also sets out a non-exhaustive list of examples of a right to exercise significant influence or control. This includes a person having absolute decision rights or veto rights related to the running of the business, for example changing the company’s business plan or the appointment or removal of the CEO.
It should be noted that the PSC register cannot be blank. Even if a company has no PSCs then that fact should be noted. The guidance prescribes official wording that must be included in a company’s register in this respect.
Indirect holdings held through companies are attributed to an individual if the individual has “control” over those companies. Control is determined using the concept of “majority stake”, which relates to having a majority control of voting rights or having the right to appoint or remove directors of, or having dominant influence over, the company.
Interests Held by Companies
While a company cannot be a PSC, it will be entered on a PSC register if it is a “relevant legal entity” (“RLE”). A company is an RLE if it meets one or more of the specified conditions and is itself required to keep a PSC register, or subject to DTR5, listed on a regulated market or on a specified overseas exchange. The RLE will be “registrable” unless its interests in a company are all held indirectly through one or more legal entities, at least one of which is a registrable RLE in relation to that company. The practical result is that, in a group of UK incorporated companies, each wholly owned subsidiary will only need to record its immediate parent in its PSC register.
Extended Scope of the Regime
When the PSC regime originally came into force, companies subject to Rule 5 of the Disclosure Guidance and Transparency Rules did not have to keep a PSC register. The Regulations now remove this exemption and companies whose shares are admitted to a ‘prescribed market’ that is not a regulated market have now become subject to the PSC regime. This principally affects companies whose shares are admitted to AIM or the NEX Exchange Growth Market (formerly ISDX Growth).
AIM companies must therefore start investigating and collecting information in relation to their PSCs. There is a short grace period for new companies subject to the regime – they must have their PSC register in place by Monday 24 July 2017.
All UK registered LLPs (including Scottish LLPs) are already subject to the PSC regime. However, the Scottish Regulations now introduce a parallel PSC regime for (i) all Scottish limited partnerships (“SLPs”) and (ii) Scottish general partnerships for so long as they are ‘Scottish qualifying partnerships’ (“SQPs”).
SLPs and SQPs are not required to keep their own PSC register but must file the information with Companies House from Monday 24 July 2017. SLPs and SQPs should therefore start making enquiries of their PSCs without further delay.
PSC Register Updates – new 14 day deadlines
From 26 June 2017 (or 24 July 2017 for entities newly within scope of the regime), PSC information needs to be updated on an event-driven basis and entities required to keep a PSC register must:
- update their PSC register within 14 days of either a PSC confirming his/her details (for individuals) or the entity obtaining the relevant information (for relevant legal entities); and
- notify Companies House (using forms PSC01 to PSC09) of the changes to its register within 14 days of the change being made to the entity’s own register. This replaces the old system where the information was supplied to Companies House annually on the Confirmation Statement (CS01).
Given that failure to comply with the PSC regime could result in a company’s officers committing a criminal offence – which could lead to fines and/or imprisonment – it is very important that these new deadlines are adhered to.
Actions to take?
Given the short transitional and filing periods provided in the Regulations, relevant companies should act quickly to assess any actions they may need to take. In particular:
- For relevant AIM or NEX companies – identify any PSCs (or RLEs) and prepare a PSC register containing the relevant details and prescribed statements by no later than 24 July 2017. Further information can be found in the guides referenced below.
- Companies and LLPs already subject to the regime – should familiarise themselves with the new updating timeframes and check to see whether any changes in PSC information have occurred prior to 26 June 2017 (that have not been previously notified to Companies House), which need to be notified by 10 July 2017.
- For confirmation statements due shortly, ensure the new form of CS01 is used and any relevant PSC notifications are made on forms PSC01 to PSC09.
BIS has reissued its various guides on the PSC regime. These can be found here.
For assistance on the PSC regime please contact one of the people named below or your usual contact at Marriott Harrison LLP.