From 26 June 2017 any companies who are required to keep a register of people with significant control (“PSC Register”) will be subject to new, shorter filing deadlines. Companies will have 28 days to notify Companies House of any changes to the PSC Register.
If you are planning a transaction that will result in a change in the overall ownership of a company – perhaps you are planning to buy a company, issue new shares or introduce private equity investment – you will need to make sure that the new filing deadlines are adhered to.
Since 6 April 2016, all unlisted UK companies and limited liability partnerships have been required to keep a PSC Register identifying and disclosing individuals or relevant legal entities with ultimate control over the company. The purpose of the PSC Register is to provide greater public transparency over the beneficial ownership of companies and to make it more difficult for corporate entities to hide criminal activity.
Identifying a Person with Significant Control (PSC) is not always straightforward, particularly where there is a complex corporate structure involved, but a PSC will be an individual who:
- directly or indirectly holds more than 25% of the shares (Condition 1);
- directly or indirectly holds more than 25% of the voting rights (Condition 2);
- directly or indirectly has the right to appoint or remove a majority of the directors (Condition 3);
- has the right to exercise, or actually exercises, significant influence or control over the company (Condition 4); or
- has the right to, or actually exercises significant influence or control over the activities of a trust or firm which is not a legal entity, but would satisfy any of conditions 1 to 4 were it an individual (Condition 5).
In practical terms, the introduction of the PSC Register has meant that most companies and LLPs need to:
- maintain a register of people with significant control (which is typically stored with the company’s statutory registers at the company’s registered office), even if there are not currently any registrable PSCs; and
- submit an annual confirmation statement to Companies House (this has replaced the annual return) which includes details of any changes that have been made to the PSC Register during that year.
Individual shareholders also need to establish whether they might be a PSC and may need to notify affected companies accordingly.
Where there is a change in the shareholding of a company which results in an individual becoming or ceasing to be a PSC, the company’s PSC Register should be updated accordingly. There are not currently any deadlines for updating the PSC Register or notifying Companies House of changes, although this information will be disclosed when the next confirmation statement is submitted.
On 26 June 2017 the UK will be implementing the EU Fourth Money Laundering Directive. As a result, affected companies and LLPs will be subject to the following deadlines following a change in their PSCs:
- 14 days to update the PSC Register; and
- a further 14 days to file this information at Companies House.
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.
Careful consideration should be given to the new filing deadlines, particularly if you are planning a transaction which will result in a change in the company’s PSC. It is worth remembering that it will not only be share sales and purchases that are affected. Transactions such as the issue of new shares, a company buying back its own shares or any other reorganisations that affect the proportions in which the total shares in a company are held will potentially result in the PSC register needing to be updated.
It is also worth bearing in mind that the PSC Register may well have to be updated (both in the company’s statutory registers and at Companies House) before it is possible to register a new shareholder. If, for example, stamp duty is payable on a share transfer, the company should not update its register of members until stamp duty has been paid and HMRC have stamped the stock transfer form. However, if HMRC take longer than 14 days (or indeed 28 days) to return a stamped stock transfer form, the company will need to ensure that they update the PSC Register – and potentially notify Companies House – even though they will not yet be able to update the register of members. This is a rather quirky (and probably unintended) consequence of the new PSC deadlines, but it does serve to underline the importance of carefully considering when the relevant steps need to be taken.
We provide a full range of company secretarial services and are happy to advise on any issues relating to the impending changes in the PSC regime. Please email email@example.com for more information or speak to your usual contact at the firm.