The Small Business, Enterprise and Employment Act 2015, which received royal assent on 26 March 2015, will introduce a number of important changes to UK company law. One of the most significant changes is the introduction of the PSC Register. This is intended to increase the accountability and transparency of UK companies by requiring them to identify and retain a public register of people with "significant control" (PSC) over the company.
The Government is now hinting at who will be caught as a PSC by issuing some draft guidance – your business may well be affected by these new rules.
When will the PSC Registers come into effect?
With effect from January 2016, companies will need to start keeping their own PSC register.
From 6 April 2016, companies will need to submit the PSC Registers to Companies House as part of their annual confirmation statement, which will replace the annual return.
What is meant by 'significant control'?
On 21 December 2015, BIS published for consultation draft statutory guidance on the meaning of significant control or influence.
A person with 'significant control' is an individual who either:
- owns or controls more than 25% of a UK company's shares/voting rights; or
- has the ability to exercise significant influence or control over the company and/or its board.
The guidance states that significant control and influence are alternatives. A person will have 'significant control' over a company if they have the power to direct its policies and activities. A person with 'significant influence' is able to ensure that the company adopts those policies or activities which are desired by the holder of significant influence.
As examples of the rights which can constitute significant influence or control, the guidance notes veto rights or absolute decision rights over decisions related to the company's business including rights over adopting or amending a company's business plan, changing the nature of a company's business or making additional borrowing from lenders.
The draft guidance also sets out a number of safe harbours which will not in the normal course of business constitute significant influence or control, which include the following:
- a director of a company;
- an employee acting in the course of their employment;
- a person providing advice or direction in a professional capacity, for example, lawyers or accountants; or
- a person engaging in a third party commercial or financial agreement, for example, a customer or lender.
Next Steps
The consultation on the draft guidance closes on 11 January 2016.
Until then, given the short timescale before the proposed implementation of the PSC Register, it is important for companies to start considering what they have to do to comply with these new rules.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
