Changes to the PSC Regime – what does it mean for you?
Last year, the UK Government brought about a number of fundamental changes to UK company law and the introduction of a central public registry of those individuals who hold significant control of UK companies – referred to in the legislation as 'People with Significant Control' or 'PSC'. Since then, the vast majority of UK companies and UK limited liability partnerships (LLPs) have been required to maintain a statutory register of PSCs and also to register the information of the PSCs when filing the company’s or LLP’s confirmation statement (CS01) with Companies House.
This year, the UK government introduced further changes to the PSC regime by the introduction of The Information about People with Significant Control (Amendment) Regulations 2017 (PSC Regulations) which came into force on 26 June 2017 (Implementation Date).
What are the main changes?
The scope of the original PSC Regulations has widened. When the legislation came into force last year, some entities were exempt from the PSC Regime, such as those companies subject to Rule 5 of the Disclosure Guidance and Transparency Rules (commonly referred to as DTR5 companies). The PSC Regulations now remove this exemption and therefore all DTR5 companies will now be subject to the PSC regime. Companies that traded on AIM or NEX Exchange will now be required to keep a PSC register and file its PSC information with Companies House. Also, UK unregistered companies (companies formed under Royal Charter or special or private Act of Parliament), Scottish limited partnerships and some qualifying Scottish general partnerships were all the partners are corporate bodies now also fall within the scope of the PSC Regulations. For these entities, the government has given a four-week transitional period (from the Implementation Date) to comply with the PSC Regulations. This means that the affected entities will have until 24 July 2017 to comply with the obligation to maintain and file information of their PSCs with Companies House.
Increased frequency of reporting. From the Implementation Date, companies and LLPs which were already subject to the PSC Regime are now required to update its PSC registers within 14 days, whenever there is a change of PSC information. The new information must be registered with Companies House within a further 14 days, using forms PSC01 to PSC09.
Failing to comply
Breaches of any part of the PSC Regime will generally incur a criminal liability. The sentencing options range depending on the type of offence committed, but penalties range from unlimited fines to imprisonment. It will always be in an affected entity’s best interests to comply with the PSC Regulations.
The changes under the PSC Regulations were introduced to implement the Fourth Money Laundering Directive (2015/849). However, there will be further changes envisaged to the PSC Regime with the implementation of the Fifth Money Laundering Directive (Fifth Directive) which could see the threshold of shareholding (one of the PSC conditions) being lowered from 25% to 10% and there is also a proposal for a new register to be maintained at Companies House with details of beneficial owners of overseas companies holding UK real estate. Therefore, we could expect further developments in this area. Although there is no set date for when the Fifth Directive will come in, it could be as early as late summer or autumn of 2017.
PSC Register requirements
By way of reminder for those companies new to the PSC Register requirements, entities within scope must take steps to identify any PSC or relevant legal entity (RLE) and send notice to anyone it believes falls under either of these headings seeking confirmation of their position. Please refer here for further information.
How does this affect you?
If you are:
- a director or company secretary of an entity which is now caught under the PSC Regulations, you have a duty to undertake an investigation of your company’s PSC and register the relevant information with Companies House. The PSC register must never be left blank, even where no PSC or RLE has been identified. The position must be recorded on the PSC register using one of the prescribed forms of words
- a shareholder, and hold more than 25% of the shares or voting rights in a company, then you are highly likely a PSC of that company. You must comply with the notice received from the company and confirm your details so your information can be registered and filed with Companies House. It is an offence to ignore the notification and your rights as a shareholder (such as the right to vote or receive dividends) may be suspended by the company if you do not comply
- a person who indirectly owns more than 25% of shares in a company (i.e. your shares are held by someone else on your behalf), you will likely be a PSC and the same rules apply to you. Your nominee is also legally required to disclose to the company that you own the shares beneficially.