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Important Changes to Company Law that effects all UK Companies Registered in the UK

From 6 April 2016, companies registered in the UK — including charitable companies, community interest companies, dormant companies, and UK subsidiaries of companies registered outside the UK — must keep a new register of people with significant control (PSC register).

The following is an overview of the changes, full details can be found at GOV.UK

So what makes someone a Person with Significant Control?

A PSC is any individual that meets one or more of the following:

1. Directly or indirectly holds more than 25% of the shares
2. Directly or indirectly holds more than 25% of the voting rights
3. Directly or indirectly has the right to appoint or remove directors holding a majority of votes at board level
4. Exercises, or has the right to exercise, significant influence or control
5. Has significant influence or control over a trust/firm which would meet one of the first four tests if it were an individual

By calling it a register of Persons of Significant Control is a bit misleading as it gives the impression that only individuals who meet the definition of a PSC have to be included. However, Relevant Legal Entities (RLEs) may also need to be included.

An organisation is an RLE if:

1. It is a legal entity (a body corporate); and
2. It would meet the definition of a PSC if it were an individual, and
3. It is required to maintain its own PSC register, or is a company exempt from maintaining one, or has to comply with comparable disclosure requirements relating to listed share companies.

Whether an RLE is registrable and has to be included on the company's PSC register depends on its relationship with the company. For most social firms and social enterprises, it will be straightforward, as in the following examples.

Where a (charitable) company is the sole member of its trading company, or is one of a maximum of three members with equal shares, it would meet condition (1) if it were an individual (owning more than 25% of the shares). Or if it has the right to appoint or remove the majority of the trading company's directors, it would meet condition (3). The charitable company is a registrable RLE and must be entered in the trading company's PSC register.

If company A owns more than 25% of company B's shares, controls more than 25% of the votes or has the right to appoint or remove the majority of B's directors, company A is a registrable RLE and must be entered in B's PSC register.

Other registrable persons

A local or national government or government department which would be a PSC if it were an individual is defined as an ‘Other registrable person’ and must be entered in the company's PSC.

This would apply to Local Authority Trading Companies (LATCs)

So what must be done to comply?

The register does not need to be complicated as long as all the relevant information is recorded.

Firstly you need to identify if you have any:

I.Persons of Significant Control

II.Relevant Legal Entities

III.Other Registrable person

If there is none you still need to create a register and record that "The Company knows or has reasonable cause to believe that there is no registrable person or registrable relevant legal entity in relation to the company."

Note – it is an offence to keep the register blank – a register has to be created and kept up to date. Failure to comply is punishable by fine or up to two years imprisonment.

If the company does identify any of the above three registrable then specific information needs to be recorded.

In the case of PSCs

• Name
• Date of Birth
• Nationality
• Country, or state in UK where the PSC usually lives
• Service address
• Usual residential address
• Date person became a PSC ( 6^th April 2016, if was a PSC on the date this came into force)
• Which of the 5 conditions for being a PSC have been met

In the case of Relevant Legal Entities or Other Registrable Person

• Name of the legal entity.
• Address of its registered or principal office.
• Legal form of the RLE and the law by which it is governed.
• Company number, if applicable.
• Date it became a registrable RLE in relation to the company ( 6^th April 2016, if was a RLE on the date this came into force)
• Which of the 5 conditions for being a PSC have been met

At the moment companies can maintain this register themselves, but in June 2016, there are changes due to reporting mechanisms and this information will form part of the information sent to Companies House as part of the Confirmation Statement, the new name for annual returns.