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Since 6 April 2016, every UK private company, most UK public companies, and all UK Limited Liability Partnerships (LLPs) must create a statutory register of Persons with Significant Control (PSCs). Failure to do so is a criminal offence. Each must take reasonable steps to find out if it has any PSCs and to identify them. It must give notice to each person (or legal entity) it knows or has reasonable cause to believe should be recorded in its PSC register. It may also give notice to others who may know someone is a PSC, or who know someone who does.
The PSC register is open to the public, provided inspection is for a proper purpose. From 30 June 2016, information from a company's PSC register must be filed at Companies House on a regular basis.
The rationale behind the new rules is that if UK companies and LLPs are required to make public the names and other particulars of individuals who ultimately control or influence them, the probability that those individuals are using UK companies or LLPs for tax evasion, money-laundering, to fund terrorism, or for other wrongful activities, is reduced.
The law sets out specific criteria for determining who is a PSC, which can be complex to apply. For instance, an individual is a PSC if they do, or can, exercise 'significant influence or control' over a company, or over the policies or activities of any trust or firm whose trustees or partners would, if they were individuals, be PSCs.
The Government has now published the following guidance to help businesses comply with the new law, which they will find useful:
• Draft statutory guidance to help companies interpret what amounts to 'significant influence or control'.
• Similar draft statutory guidance for LLPs.
• An 87-page guide on the PSC rules generally. This is not statutory, but provides useful guidance on interpreting the conditions.
• A five-page summary of the 87-page general guidance.
• Guidance for potential PSCs themselves.
These are all available on the GOV.UK website.
Jane Holroyd, solicitors in Ramsdens Commercial team comments: "Most companies will have been preparing for the change to company requirements for some time and some may have even had a PSC Register in place since January 2016 when the regime was originally scheduled to come into force. However for those that haven’t and are still struggling with meeting the requirements, the updated guidance will be of assistance.
Before 6 April 2016 a company or LLP only needed to record the persons or bodies that were the immediate legal owners of its shares. Companies will now have to look through however many layers of ownership there are within the company structure to identify persons who ultimately have significant control of the company.
The regime is part of the government’s effort to create transparency in the hope that this will combat tax evasion and money laundering by allowing a full picture of the legal ownership of private companies and LLPs.
If a company fails to take reasonable steps to identify its PSCs, both it and any officer in default will have committed a criminal offence, punishable by an unlimited fine and/or up to two years’ imprisonment. For this reason it is extremely important that companies and LLPs comply in with the requirements, even though this could result in a considerable amount of work on the company’s behalf."
If you need help or advice email Jane at email@example.com, call 01484 558055 or follow her on Twitter @JanesRamsdens.