People with Significant Control (PSC) Register

Introduction

Looking through the legal ownership of entities such as companies, Limited Liability Partnerships (LLPs), trusts, certain Scottish partnerships and other similar entities (UK legal entities) to find the ultimate beneficial owner(s), is a hot topic. Beneficial ownership registers have been produced both in the UK and globally which are intended to improve transparency around the ownership of assets.

The UK has several beneficial ownership registers that enable the owners and controllers of assets to be identified. For UK legal entities there is a publicly searchable corporate register, the People with Significant Control register (“PSC register”), about which this note provides a high-level overview.

Other registers operated in the UK are the trust register, Register of Overseas Entities (that own or are seeking to acquire UK land), and, in Scotland, the Register of Persons Holding a Controlled Interest in Land. Separate briefing notes are available on the trust register and Register of Overseas Entities.

Background to the PSC register 

It is a legal requirement to inform Companies House of the individuals/relevant legal entity(ies) (“RLEs”) ‘behind’ UK legal entities. This information is publicly available, subject to some protections outlined within this note.

Public data on companies goes beyond identifying direct shareholdings and details of directors. Companies need to trace through to their ultimate beneficial owners, wherever resident, including individuals who could or do exert influence or control (on them or on their immediate owners), as defined under UK company law. These individuals/RLEs are referred to as People with Significant influence and Control (PSCs).

Requirements

Affected entities must typically both maintain their own internal PSC register (in accordance with the Companies Act 2006) and make required notifications to Companies House. New information and changes to PSCs must be added to a given entity’s internal PSC register within 14 days (this is not a mandatory requirement for Scottish partnerships), and Companies House notified within a further 14 days.

Affected entities

The entities within the scope of the PSC Register are UK LLPs, eligible Scottish partnerships and UK corporates. However, there are exemptions, such as for UK legal entities that a) are listed on the London Stock Exchange and already disclose information on shareholdings under certain listing rules, and b) have voting shares listed in the UK or European Economic Area (EEA) on a regulated market, or specified markets in the USA, Switzerland, Japan or Israel.

Who are PSCs?

PSCs are individuals who meet one or more of the five tests below:

1. An individual holds, directly or indirectly, more than 25% of the shares in the company;

2. An individual holds, directly or indirectly, more than 25% of the voting rights in the company;

3. An individual holds the right, directly or indirectly, to appoint or remove the majority of the board of directors;

4. An individual has the right to exercise, or actually exercises, significant influence or control over the company;

5. If trustees of a trust or members of a firm that is not a legal person meet any of the above conditions (or would do if they were individuals), an individual who has the right to exercise, or actually exercises, significant influence or control over the activities of that trust or firm.

For conditions 4 and 5 it is irrelevant whether such influence or control has ever been exercised.

A registrable RLE is a company that meets any one or more of the above conditions 1 – 5, and (a) keeps its own PSC register (in accordance with the Companies Act 2006), or (b) has voting shares that are admitted to a regulated market in the UK or elsewhere in the EEA, or on specified markets in Switzerland, the USA, Japan and Israel.

Where the first RLE in the company’s ownership chain is not registrable (because it does not meet the requirements set out in the paragraph above), shares and rights in the company may be held indirectly by a registrable RLE having a majority stake (e.g. holding over 50% of the voting rights) through the unregistrable RLE. This criteria can be used to go up the ownership chain.

The Department for Business, Energy & Industrial Strategy non-statutory guidance on the PSC Register specifically comments on trusts, and states that people other than the trustees, such as the trust’s settlor and/or beneficiaries if they have the right to exercise significant influence or control over the trust, must be named on the register.

UK companies, owning entities and PSCs all have obligations

Compliance with the rules is mandatory. A company is required to take all reasonable steps to ascertain whether they have any PSCs and if so, to identify them, notify the PSC in writing, insert the details into the PSC register and file the relevant statutory forms at Companies House. The company is also under a duty to maintain an accurate PSC register. In addition, a person or entity who knows or ought reasonably to know that they are a registrable person or RLE should notify the company if they have not themselves been given written notice by the company.

Some details of how the PSC register operates is in the process of changing. Notably, all PSCs, and “relevant officers” of RLEs are to be required to verify their identities with the Companies House. Companies House is to be given additional powers, including in relation to requiring additional information and greater data sharing powers. This is intended to make it harder to register fictitious beneficial owners in order to improve the reliability of the information held by Companies House. The amendments will come into force following Royal Assent of the Economic Crime and Corporate Transparency Bill.

What is shown on the register?

The public register only contains the information of (a) registrable RLEs and (b) persons who have confirmed their details to the UK legal entity as PSCs in relation to that entity

The public register contains the personal details of the individual(s) identified as a PSC including their service address and month and year of birth. The exact condition/s which they satisfy which makes them a PSC needs to be recorded. The UK legal entity must also hold the PSC’s usual residential address and full date of birth in its PSC register. Companies House requires this information and although it will not publicly be disclosed, the information will be made available to law enforcement agencies, HMRC and credit agencies if required.

The PSC register can never be blank. The current status of the PSC information gathering must be recorded – such as if the UK legal entity has not succeeded in identifying its PSCs, if it is in the process of identifying PSCs or has concluded there are no PSCs. Specific statements are assigned to a company’s status on the PSC register and these statements must be provided to Companies House.

Penalties

UK legal entities must take reasonable steps to identify PSCs. In cases where a PSC notice is not complied with, a UK legal entity has the right to effectively ‘suspend’ the relevant shares, i.e. suspend dividend, voting, sale and transfer rights. In practice, company directors may effectively have little option but to eventually use these powers in order to meet their own obligations.

Directors who fail to take reasonable steps to identify PSCs are punishable by fine, imprisonment, or both. Matching penalties apply to PSCs who fail to identify themselves or to anyone who provides false information in relation to a PSC or RLE. It is a criminal offence for individuals to fail to provide information for the PSC register.

Claim for protection from public disclosure

Applications may be made by either the UK legal entity or the PSC to Companies House on the grounds that the applicant reasonably believes that, due to the activities of the UK legal entity or due to the connection of the PSC with that UK legal entity, publishing information will put the applicant or a person living with them at serious risk of being subjected to violence or intimidation. The application must be accompanied by supporting evidence.

In such cases the information must still be provided by the PSC to the company, and the fact that the information exists but is protected, will be made public. Tax authorities, and other law enforcement authorities, can view protected information.