New transparency regime for English companies – are you ready?

PSC

This note focuses on the impact of the new regime on English incorporated companies. Broadly similar rules apply to LLPs and SAs but are outside the scope of this note.

Who does the new regime apply to?

The regime applies to:

•  English incorporated companies
•  English incorporated limited liability partnerships (LLPs); and
•  English registered Societates Europaeae (SAs).

What is changing?

The Small Business, Enterprise and Employment Act 2015 (Act) introduced measures to increase the transparency of English companies.  In April 2015, the Act implemented provisions abolishing bearer shares in English companies.  The focus has now shifted to the capture and public disclosure of details of individuals and entities who exercise significant control or influence over English companies, regardless of whether those individuals or entities are existing shareholders.

From 6 April 2016 all English companies will (subject to certain limited exceptions) have to produce, complete and maintain a single register (PSC Register) which includes details of:

•  ‘persons’ with significant influence or control (PSC); and
•  ‘relevant legal entities’ with significant influence or control (RLE).

Exceptions: Companies do not need to have a PSC Register if they are publicly listed in an EEA state (including the UK), or in Israel, Japan, Switzerland or the USA.

The PSC Register cannot be blank and will need to contain information on each PSC and RLE. The information required for each PSC includes the PSC’s name, service address, nationality, date of birth, usual residential address and the nature of his or her control over the company. For RLEs certain corporate information will need to be provided.

With effect from 30 June 2016, the requirement to file an ‘annual return’ at Companies House (which applies to all English companies) will be replaced with a requirement to file an annual ‘confirmation statement’. The confirmation statement must include the information contained in the PSC Register, which will become public (except for the day of birth and the PSC’s usual residential address).

What is a PSC and RLE?

PSC:

A PSC is a person who either alone or with others meets at least one of the following conditions:

•  Owns more than 25% of the company’s shares or voting rights;
•  Has the right to  appoint or remove a majority of its directors; or
•  Exercises (or has the right to exercise) significant influence or control over the company.

RLE:

A legal entity is an RLE if it meets one or more of the conditions 1 to 3 above and it either:

•  Keeps its own PSC register; or
•  Is publicly listed in an EEA state (including the UK), or in Israel, Japan, Switzerland or the USA.

The Department of Business Innovation and Skills has published draft guidance on the meaning of ‘significant influence or control’. Examples include:  the ability to recommend to the majority shareholders how they should vote (such recommendations always or almost always being followed); having an absolute veto right over the company’s strategy (such as changes to the business plan, hiring and firing the CEO); and having significant involvement in the management and direction of the company.

What should we be doing?

By 6 April 2016, in relation to each English company in your group, you should:

•  Set up a PSC register;
•  Use reasonable endeavours to obtain the prescribed information about the company’s PSCs and RLEs; and
•  Include the prescribed information in the PSC Register.

What happens if I do nothing?

If a company fails to comply with the requirements of the PSC regime, the company and its officers could face a fine.

If a PSC or RLE fails to provide the company with the information it needs to complete the PSC Register, the PSC or RLE could face a fine.

How can Ince & Co help?

We are currently assisting a number of companies in ensuring they are compliant with the new regime. Our corporate team would be very happy to assist you with:

•  Advice on the process for identifying who is a PSC or RLE;
•  Updating the statutory registers to incorporate the PSC Register;
•  Guidance on other provisions of the Act which may be relevant to your business (many of which come into force within the next 12 months);
•  Advice on directors’ duties.

Authors: Matthew Stratton, Stephen Jarvis

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