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The Small Business, Enterprise and Employment Act came into force on 27 March 2015 ('the Act'). The Act aims to help entrepreneurs to start, finance and grow a business in the UK. However, the Act also imposes new obligations relating to company transparency which are important for trusts practitioners.
The Act requires that companies keep a register of 'people with significant control' (PSC) over the company. All private and public companies incorporated in the UK will have to maintain a PSC register, except publicly-traded companies which already report under DTR5. Companies will be required to keep the register from January 2016 and will have to submit the required information by April 2016.
'People with significant control' are people who own or control more than 25% of a company's shares or voting rights, or exercise influence or control over the company or management of that company. This clearly extends to beneficial interests in companies held through a trust. A company will therefore be obliged to report the details of any trustee who holds more than 25% of a company's shares or voting rights and anyone who exercises significant influence or control over the activities of the company through the trust.
The Act may therefore extend to settlors who exercise significant influence over their trust asset (even if they have no right to do so). There is debate over whether the Act may catch beneficiaries too, although this is very unlikely as beneficiaries would not normally be exercising control over the trust.
The register will hold the personal details of the beneficial owners including full names, dates of birth, residential addresses and service addresses. Crucially, the register of people with significant control must be made available for inspection at its registered office. A person requesting to inspect the register must give the reason for that request and a company will be able to apply to court to deny the request if the request is not for a proper purpose.
Companies are required to maintain their own register. Failure by the company to maintain a register or failure by a beneficiary owner to provide the required information, will be a criminal offence punishable by a fine and/or imprisonment.
Trust and probate specialists need to be aware of the provisions of the new Act given that they extend to individuals who control companies through trusts. It will be important to explain the obligations of the Act to those who wish to manage their assets using trusts, especially if they would prefer not to have to reveal the extent or location of their wealth.