Small Business, Enterprise and Employment Act 2015

Changes to UK Company Law

Changes to UK Company Law are coming into force over the coming months to increase transparency around those who own and control businesses. These changes, together with similar measures introduced by the Small Business, Enterprise and Employment Act 2015 (the Act), are being implemented by the government in the hope that they will help combat tax evasion and money laundering by allowing a full picture of both the legal and beneficial ownership of businesses to be publically available.

What are the main changes?

The Register of People with a Significant Control (PSC Register):

At present companies are required to document their immediate legal owners through maintaining their statutory books.  From April 2016, put at its simplest, UK companies (whether limited by shares or guarantee), LLPs, and Societates Europaeae will be required to identify individuals and/or relevant and registrable legal entities that exercise “significant control” over the organisation. This information must then be recorded in a PSC Register.

Confirmation Statement

From 30 June 2016, all companies and LLPs will be required to submit a Confirmation Statement (replacing the Annual Return) to Companies House, to be held on public record. This will include much of the information held on the PSC Register.

Who is a Person with Significant Control (PSC)?

The Act identifies criteria through which a person and/or a legal entity may be said to exercise significant control over a company, LLP or Societates Europaeae. In summary, a person and/or legal entity is likely to have significant control if they:

  • hold, directly or indirectly, more than 25% of the nominal value of the shares; or
  • hold directly or indirectly, more than 25% of the voting rights (again, the joint and indirect interests noted above apply); or
  • hold the right, directly or indirectly, to appoint or remove a majority of the board of directors (or equivalent body); or
  • have the right to exercise, or actually exercise, significant influence or control over the company; or
  • hold the right to exercise or actually exercise significant influence or control over a trust or firm which would satisfy one of the above criteria.

What particulars must be included on the PSC Register and Confirmation Statement?

Individual Natural Person

The following details must be included on the register:

  • Name.
  • Service address.
  • The country or state (or part of the United Kingdom) in which the individual is usually resident.
  • Nationality.
  • Date of birth.
  • Usual residential address.
  • The date on which the individual became a registrable person in relation to the company in question.
  • The nature of his or her control over that company.

In contrast, the Confirmation Statement will only set out the individual’s name, month and year of birth, nationality, service address and details of the interest concerned.

Legal Entity (such as a company)

The following details must be included on the register:

  • The company or firm name.
  • Its principal office address.
  • Its legal form and the law by which it is governed and where it is registered.
  • The date on which it became a registrable legal entity in relation to the company in question.
  • The nature of its control over the company.

A legal entity may only be recorded as exercising significant control over another where it is “relevant” and “registerable” for the purposes of the Act. In practice this means that non-UK registered companies are unlikely to qualify and it will be necessary to supply information about the ultimate beneficial owners instead.

Enforcement

Criminal penalties will apply to companies and individuals who fail to provide information or recklessly provide false information to the Registrar of Companies. The potential sanctions include (amongst others) fines, imprisonment, restrictions on shareholder’s ability to exercise their rights in respect of their shares and restrictions on their rights to receive a dividend.  

Next steps

All entities subject to the new requirements must:

  • Take reasonable steps to establish who exercises significant control over them.
  • Collate the required information to complete the PSC Register.
  • Keep and update a PSC Register.
  • Deliver a Confirmation Statement when prompted by Companies House.

 

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