New Company Register (detailing the Persons with Significant Control) required from 6 April 2016

25 January, 2016

New Regulations (The Small Business, Enterprise and Employment Act 2015 (Commencement No.3) Regulations 2015 have come into force which confirm the date that limited companies and LLPs will need to keep a PSC Register is 6 April 2016.

The PSC details will not have to be provided to Companies House until 30 June 2016, but if a member of the public wants to inspect a PSC Register before then the company or LLP will need to make the information available (unless it can demonstrate to a court that the information is not sort for a “proper purpose).

Note that the PSCs themselves are required to provide the information to the company. Failure to comply with the rules will be a criminal offence for the company and PSCs.

The Act defines a PSC broadly as a person who holds 25% or more of the shares or voting rights in the company or the right to appoint or remove a majority of the board of directors. There is however a broad category of persons who “otherwise exercises significant control”.  We are expecting final guidance from BIS on what this would cover at the end of January, but we now have some indication from draft guidance just published by ICSA (which chaired a working group put together by BIS).

The ICSA guidance includes examples of persons who might be considered to have the required degree of control, as well as some “safe harbours”.  Professional advisers, suppliers, directors and employees where acting in the usual course of their business, appointment or employment would not usually fall within the definition of a PSC (but may do if they have other ways of exercising control, for example if a director also owns a significant business asset and uses that to influence the running of the business).   The guidance also gives examples of people may have the right to exercise significant control, as well as those who actually exercise that control.  Shareholders agreements or amended articles of association may give the requisite degree of control because they confer on a person a right of veto in relation to, for example, adopting business plans, changing the nature of a company’s business or making additional borrowing, thereby making a person a PSC, regardless of whether the person actually chooses to exercise that control.  However, veto rights conferred for the purposes of protecting a minority shareholding would not usually, on their own be sufficient to constitute “significant influence or control”.

ICSA guidance also gives examples of situations where a person may be deemed a PSC in relation to an LLP, such as where a person is likely to receive more than 25% of the profits of the LLP or where someone has an absolute right or veto right in relation to matters such as adopting or amending the business plan, changing the nature of the business or in relation to borrowing. Similarly to the situation for companies though, it seems unlikely that rights held for the purposes of protecting minority interests alone, such as a veto right over diluting voting rights, winding up or amending the LLP agreement, would confer the requisite degree of control.

Companies and LLPs need to be taking steps to gather the information about their PSCs now if they have not already begun this.