The PSC Register – What you need to know

From January 2016, UK Companies will be required to create and maintain a ‘register of people with significant control’ over it.

This “PSC register” is a new statutory register that all UK companies (including LLP’s but excluding UK listed companies) will need to maintain as part of the UK’s commitment to greater corporate transparency.The register will be available for public inspection and also searchable online via Companies House.

All companies must have a PSC register in place from January 2016 and will be required to file this information with Companies House from April 2016 when submitting its annual confirmation statement, which is due to replace the annual return.

Who has ‘significant control’

There are five broad ways in which an individual can be classed as exercising significant control.These are where an individual:

1. directly or indirectly holds more than 25% of the shares in the company;
2. directly or indirectly controls more than 25% of the voting rights in the company;
3. has the power (directly or indirectly) to appoint or remove a majority of the board of directors of the company;
4. has the right to or otherwise exercises signification influence or control over the company; or
5. has the right to exercise or actually exercises significant influence over a trust or firm which in turn falls within any of the above categories in relation to the company.

As only one of these broad categories has to be satisfied for an individual to be included on the PSC register, it is likely that in many cases the PSC register will look very different to the company’s register of members.

Obligations and penalties

A company has an obligation to use reasonable steps to identify registerable persons. It will be required to investigate and issue notices requesting the specified information to all registerable persons or any third party individuals who it believes could identify the registerable person.

In the event that a registerable person ignores a notice or fails to provide the information needed by the company for inclusion in the PSC register, the company will have the option of issuing a restrictions notice.This will have significant adverse effects as it works by freezing any interest in the affected shares.This will mean that the shares cannot be transferred and any voting rights or rights to dividends will be lost until the registerable person complies with the information request.

What does it mean for my business?

It will be possible to apply to Companies House to prevent public disclosure of the PSC register but this relief is restricted to extremely limited situations where there is a serious risk of violence or intimidation towards a registerable person or an individual living with that person. The requirement to maintain a PSC register will therefore have a significant impact on individuals who do not wish for the extent of their involvement in a company to become public knowledge.

It is possible that some individuals who would like to remain anonymous for commercial sensitivity or confidentiality reasons will begin to explore alternative arrangements in an attempt to retain their privacy – if this is done, care needs to be taken to ensure that the new arrangements do not undo any tax efficient planning already in place.

If nothing else, the requirement to create and maintain a PSC register adds an administrative burden to companies who will now be obliged to undertake possibly time consuming and sensitive investigations.

If you are a shareholder or a company director and would like to discuss this issue or would like any other assistance in understanding your company law obligations then please contact one of Ashtons Legal’s experienced corporate lawyers for a conversation.