Is your company prepared for business law?

Helping to combat tax evasion, money laundering and terrorist financing, the new obligations will provide greater transparency as to exactly who owns, or has control over UK companies.

The information contained in the PSC Register will need to be provided to Companies House and will be made accessible to the public. In the case of new companies formed from 30 June 2016 onwards, it will be necessary to complete a statement of initial significant control which will be submitted to Companies House with the other documents required to form a company. 

In the case of existing companies, from 30 June 2016 onwards the information will be provided in the next annual Confirmation Statement the company provides to Companies House. The Confirmation Statement will replace the Annual Return that company clients are familiar with.

What is a PSC?

A PSC is defined as a person who holds, directly or indirectly, more than 25 per cent of a company’s shares or voting rights, has the right to appoint or remove directors holding a majority of the votes that can be cast at a meeting and has significant influence or control over the company.

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Relevant legal entities

A PSC must be an individual. However, many companies count other companies amongst their shareholders, and many are wholly owned by parent companies. Accordingly, companies must also identify and register any relevant legal entities (RLEs) which, if they were individuals, would be classed as a PSC.

However, not all entities holding shares in a company are classified as RLEs. To be an RLE an entity must maintain its own PSC register, be subject to Chapter 5 of the Financial Conduct Authority’s Disclosure and Transparency Rules or have voting shares admitted to trading on a regulated market in the UK or European Economic Area or on specified markets in Switzerland, the USA, Japan and Israel.

Most entities holding shares in a company will fulfil one or more of these criteria and must be registered and identified as RLEs. Where an RLE is so identified and registered in a company’s PSC register, it is not necessary to also identify who owns the RLE (although of course, where the RLE maintains a PSC Register itself, the relevant information will have to be included in that). In the rarer situations where an entity holding shares in a company does not fulfil one or more of these criteria, it must not be registered and identified as an RLE. 

In such situations, it is necessary to look past that entity and up the chain of ownership until either a PSC or RLE is identified with majority ownership of that entity, or there is confidence that no PSC or RLE exists.

What if your company has no PSC?

Not all companies will have a PSC. However, the PSC Register can never be blank. If a company has taken all reasonable steps and has identified that there are no individuals or legal entities which meet any of the conditions above, this must be entered on the PSC Register. The PSC Register must state: “The company knows or has reasonable cause to believe that there is no registrable person or registrable relevant legal entity in relation to the company.”

Read on to find out what to do if someone ceases to be a PSC.

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