From the 6th April 2016, all UK non-listed companies and LLPs will be required to identify and register all persons with Significant Control over the company. These are also called registers of Beneficial Ownership.
This register will need to be included in all UK Company Annual returns from April 2016 onwards.
The government has published guidance for companies and LLPs on the register of people with significant control requirements.
It is a criminal offence for Directors to fail to comply with the new disclosure laws or to register Persons with Significant Control (PSCs) in the annual return.
The new requirement is set out in the Small Business, Enterprise and Employment Act 2015.
Control is broadly defined and includes:
• individuals who directly or indirectly hold more than 25% of the shares or voting rights in the company,
• are able to appoint or remove a majority of the board; or
• otherwise have the right to or actually exercise significant influence of control over the company.
The aim of this new disclosure law is to increase transparency over who are the beneficial owners and controllers of UK companies. Why the need for such transparency? Apart from helping to inform investors, the new registers will help law enforcement agencies, HMRC, SFO, and the Police to find information quicker, and in their efforts to weed out money laundering and tax evasion. The Panama Papers leak is a timely example this practice of hiding income by using shell companies whose ultimate beneficiaries are unclear.
This new law was introduced as a result of a commitment made at a G8 summit hosted by the UK Government in 2014. The remainder of the G8 will follow soon. There will be similar rules forcing companies across the rest of the EU to disclose their registers of beneficial ownership/ Persons with Significant control by June 2017.
An officer of the company will be required to do the following:
Establishing who has control should be fairly straightforward in a single company. It might however be less straightforward for companies in groups. Directors of each UK company are obliged under the new legislation to make reasonable enquires of parent companies to establish who to record in the register who controls the company.
Directors have to look through corporate structures and trust arrangements to find out who is the ultimate Person or People with Significant Control.
There will always be a disclosure of an individual name unless the ultimate holding company is listed on a stock exchange where there are already sufficient disclosure requirements or is another private UK limited company.
It is a criminal offence if Directors fail to comply with the new disclosure laws. Directors can be imprisoned for up to 2 years. Both the Directors and the Person(s) with Significant Control have obligations to report the PSC’s shareholding and disclose it.
Sanctions can also be imposed on the shares of a Person with Significant Control and could stop the payment of dividends or sale of the shares.
Need more information on the new register for Persons with Significant Control?
The rules are complex and intricate and applying the rules can be confusing, time consuming and costly.
If you need more information or assistance on registering Persons of Significant Control or issues relating to Beneficial Ownership, or wish to:
1. Protect yourself as a company director and ask the right questions to find out who is the Person or People with Significant Control,
2. Complete the new PSC registers and file your next Annual Return,
Or call us on 0203 755 5288.
We are already advising global companies and their Boards about how to comply with the new regulations on registering Beneficial Ownership/Persons with Significant Control.