PSC Registers - Are you compliant?02 Jun 2017
The new rules on PSC Registers came into force over a year ago but many companies are still not compliant. Since 6 April 2016 every UK company (including dormant companies, companies limited by shares, companies limited by guarantee and community interest companies) and every UK limited liability partnership must keep and maintain a register of all people who have significant control over it (known as “PSCs”). The PSC register must be made available for inspection by the public and filed at Companies House in the annual confirmation statement (the new annual return).
Failure to take reasonable steps to investigate or obtain information for the PSC Register is a criminal offence and the company and every officer in default may be subject to a fine and/or up to two years’ imprisonment.
Who must keep a PSC Register?
All UK companies and LLPs need to keep a PSC register, except listed companies subject to Chapter 5 of the Financial Conduct Authority’s Disclosure and Transparency Rules.
What is a PSC?
A PSC is a person who meets one or more of the following conditions in relation to the company/LLP:
1. Holds, directly or indirectly, more than 25% of the shares in the company (or in the case of an LLP – holds the right to share in more than 25% of the LLP’s surplus assets on a winding up);
2. Holds, directly or indirectly, more than 25% of the voting rights in the company;
3. Holds the right, directly or indirectly, to appoint or remove a majority of the board of directors of the company (or, in the case of an LLP, the majority of the persons entitled to take part in the LLP’s management);
4. Holds the right to exercise, or actually exercises, significant influence or control over the company/LLP; or
5. Has the right to exercise, or actually exercises, significant influence or control over the activities of a trust or firm which satisfies one of the above conditions.
If a UK company (or a listed overseas company) meets one or more of the conditions above then it should be included in the PSC Register as it is a Relevant Legal Entity (RLE). An unlisted overseas company should not be included in the PSC Register and instead you will need to look behind this overseas entity to identify who the majority stakeholder in that entity is and they should be included in the PSC Register.
Common mistakes companies/LLPs are making in their PSC Register
1. Only assessing who the PSCs are based on the current shareholdings in the company and not considering the other grounds:
– For example, a person may hold fewer than 25% of the shares in the company but shares in that company may be divided into voting and non-voting and this person may hold over 25% of the voting rights. The articles of association of the company and any shareholders agreement should also be considered in relation to assessing who holds more than 25% of the voting rights.
– A non-shareholder could still be a PSC, for example, if a founding member no longer holds shares but the board follows his instructions, he may be deemed to satisfy condition 4.
2. Not taking into account voting patterns when considering who holds more than 25% of the voting rights:
– The statutory guidance states that where someone holds less than 25% of the voting rights in the company but always votes in the same way as another shareholder, they should be classed as holding the number of voting rights they hold collectively. Eg. 4 shareholders, each hold 25% of the shares and 25% of the voting rights but they all always vote in the same way, this will be classed as a joint arrangement and all 4 of them should be considered as holding 100% of the voting rights.
3. Where there is a UK corporate shareholder, failing to insert their details in the PSC Register and instead including the corporate shareholder’s PSC:
– If a UK company meets one of the conditions above then they will be a Relevant Legal Entity and the company’s details should be inserted into the PSC Register.
– Conversely, an overseas company is not a Relevant Legal Entity and should not be inserted into the PSC Register, instead the majority stake holder (ie the individual who holds more than 50% of the shares) in the overseas corporate shareholder should be identified.
4. Including condition 4 or 5 as a reason where a PSC or RLE satisfies conditions 1 -3:
– Conditions 4 or 5 should only be considered if conditions 1-3 are not applicable.
What you should do
See our introductory note into the PSC from last year here for the practical steps companies need to be taking to comply with its PSC duties.
Future changes to PSC Registers?
The EU 4th Money Laundering Directive is due to be implemented into UK law on 26 June 2017 which will result in some changes being made to the PSC rules.
See our next article on the 4th Money Laundering Directive for more information here.
If you have any queries regarding your PSC requirements or want to discuss anything raised in this article please to contact Anne-Marie Coles in our corporate department on 0161 838 8141.