UK: The New PSC Regime

Last Updated: 4 April 2016
Article by Shearman & Sterling LLP

The UK is introducing new beneficial ownership disclosure rules, which will require UK companies and LLPs to create and maintain a new statutory register of people with significant control (PSC register). This note sets out the main features and requirements of the new regime."

Introduction

From 6 April 2016, subject to certain exemptions mentioned below, UK companies, limited liability partnerships ("LLPs") and societates europaeae ("European Companies" or "SEs") will have to establish and maintain a new statutory register of persons with significant control over them ("PSCs" and the "PSC register"). This register will be open to public inspection. From 30 June 2016, they will also have to file the information in their PSC registers with Companies House where it will be publicly available. These new rules implement a commitment by the UK government to increase transparency of corporate ownership for various purposes.

The principles behind this new "PSC regime" are relatively straightforward, but the detailed legal rules setting out the regime - particularly as they apply to complex corporate structures, as opposed to wholly-owned group structures - are quite complex.

Although the rules are primarily designed to require the disclosure of beneficial ownership or control by individuals of private or unlisted UK companies, they will still be relevant to listed groups of companies with UK subsidiaries. These UK subsidiaries will be required to keep a PSC register and include in it details of their parent company as their significant owner or controller (as explained below).

PSCs and RLEs

A company's PSC register must always disclose whether or not the company has any PSCs, and by definition these people will always be individuals (i.e. natural persons) who have certain interests in or a level of control over the company, whether held directly or indirectly.

However, in certain cases mentioned below (see "Holdings or Interests Held by Legal Entities Which are RLEs" below), where: (i) an individual has "significant control" over a company indirectly through a chain of companies, or (ii) there is no such individual in relation to the company required to keep the PSC register (e.g. in the case of listed group of companies with no controlling shareholder), instead of registering an individual as a PSC, the company may be required to register a legal entity (a "Relevant Legal Entity" or "RLE") which has significant control over the company, whether directly or indirectly. This will be the case where the interest or control held by the legal entity would have made it registrable as a PSC if it had been an individual and where that entity is itself subject to certain public disclosure requirements with respect to its own beneficial owners or controllers (including, if it is a UK incorporated entity, through having to keep its own PSC register).

The idea here is that anyone searching to find out which individuals may ultimately be in a position to exercise significant control over the company with the PSC register will be able to pursue their searches by looking at the public disclosures made by an RLE registered on the PSC register.

Key principles underlying the PSC regime (described in the rest of this note) therefore include:

  • when a person is to be taken to have "significant influence or control" over a company,
  • when a person is to be taken to have an "indirect" interest in a company, and
  • which legal entities are to be treated as RLEs and so potentially registrable on a PSC register.

Who is Covered by the Regime?

All UK companies, LLPs and SEs. Exempted UK companies, which do not have to keep a PSC register themselves but, as mentioned above, might in some cases find themselves having to be entered on another company's PSC register as an RLE, are those subject to similar ownership disclosure requirements under certain listing regimes – i.e. UK companies with voting shares admitted to trading on: (i) regulated markets in the UK (e.g. the London Stock Exchange's Main Market) or AIM, (ii) other EEA regulated markets or (iii) certain specified exchanges in the US (including NYSE and NASDAQ), Japan, Switzerland and Israel. Even though these "listed" UK companies will not need to keep a PSC register themselves, their unlisted UK subsidiaries will still have to maintain their own PSC registers.

The new law does not currently apply to other UK entities such as limited partnerships or charitable incorporated organisations. It also does not require any non-UK incorporated or registered entities to keep a PSC register, even if they have a presence or branch in the UK.

In general, the rules are the same for companies (including SEs) and LLPs, save where expressly provided otherwise. By way of background, SEs are companies that are formed under an EU Regulation and are treated as public companies in the EU member state in which they are registered and can move their domicile or place of registration between member states.

Who are Persons with Significant Control (PSCs)?

A PSC is an individual who meets at least one of the following conditions (the PSC conditions) in relation to a company (the conditions are different in relation to LLPs - see "What About Interests Held in LLPs" below):

  • holds, directly or indirectly, more than 25% of the shares,
  • holds, directly or indirectly, more than 25% of the voting rights,
  • holds, directly or indirectly, the right to appoint or remove directors holding a majority of the votes that can be cast at board meetings,
  • has the right to exercise, or actually exercises, significant influence or control over the company (the fourth PSC condition), or
  • has the right to exercise, or actually exercises, significant influence or control over the activities of a trust or firm which is not a legal entity and which meets any of the above mentioned conditions (the fifth PSC condition).

PSCs also include corporations sole (i.e. where the function of an office sits with a particular person), governments or government departments of any country or territory, international organisations whose members include two or more countries or territories or their governments and local authorities or local government bodies in the UK or elsewhere, in each case which meet any one of the PSC conditions.

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