As mentioned in my previous article in relation to the Small Business, Enterprise and Employment Act 2015 ('the Act') greater transparency in relation to companies is a key part of the Company law changes brought in under that Act. In particular, the idea of exactly who owns what in relation to companies as defined under the Companies Act 2006. In broad terms (subject to the Companies Act 2006 provisions) this means companies incorporated in England, Wales and Northern Ireland. The changes do not apply to overseas companies registered here.
In the Act the PSC register provisions are detailed in Part 7, sections 81-83 and Schedule 3. Section 82 and Schedule 3 insert a new Part 21A in the Companies Act 2006.
What do the provisions do?
Create a central registry of beneficial ownership in companies. This will be held by the Registrar (Companies House).
Define who is a beneficial owner - ie person with significant control.
There are no obligations on companies and their officers to obtain the information - subject to sanctions - imprisonment or a fine.
There are also obligations on persons with significant control and their advisers (ie persons with knowledge of the beneficial owner) to provide information to companies. Again, these are subject to similar sanctions.
The information held on the PSC register is available to the public.
Who/what should be registered?
The government will be publishing both statutory and non-statutory guidance in this area in order to assist companies to comply. It is anticipated that this guidance will be available before the end of 2015.
The new PSC register should contain details of people with significant control as well as relevant legal entities (RLE). An RLE is a legal entity that would have been a person of significant influence or control if an individual and the disclosure requirements in Part 21A apply to it. Broadly speaking it means that a person with significant control is an individual or legal entity that holds directly or indirectly:
more than 25 per cent of the share capital (according to their nominal value);
more than 25 per cent of the voting rights in the company (as defined further in the supplementary provisions);
the right to appoint or remove the majority of the board;
the right to exercise, or actually exercises, significant influence or control over the company.
Part 21A as set out in the Act then contains further details on how these terms should be interpreted, for example, where a company does not have a share capital then the reference is to the right to a share in the capital or, as the case may be, the profits of that company, the particulars that must be registered for an individual and for legal entities and provides further details on the enforcement regime and other relevant matters that will apply.
The new Part 21A will apply to all companies other than an issuer to which Chapter 5 of the Disclosure and Transparency Rules sourcebook applies. This is on the basis that such companies already comply with other transparency obligations so to impose more would be an excessive burden. The Secretary of State can make regulations to take other companies of any description outside the Part 21A provisions.
The changes will come in next year with the effect that from April 2016 affected companies must maintain this information. From June 2016 the information in question will have to be filed with the Registrar (Companies House). From that time on the information will be available to the public. Companies are advised to take action to be able to ensure compliance with the new legislation, in particular given that the penalties for non-compliance are severe.