As we have been alerting you over the last two years, the new regime for registers of persons with significant control (PSC register regime) for UK affected entities is nearly upon us, and will commence on 6 April 2016.
What is the new regime?
From 6 April 2016 UK affected entities, UK LLPs and UK societas europaea will need to create and maintain a new register (in addition to the existing statutory registers) being a register of persons with significant control of the company. Affected entities (and officers) who do not meet their new legal obligations on 6 April 2016 will commit criminal offences and risk imprisonment for up to two years.
Expressed most simply, affected entities need to identify and maintain a record of the people who exercise control over their company and maintain a new register of this information. The test of control has a number of elements and there may be multiple controllers. In addition, as part of the check and confirm obligation (formally known as the annual return) affected entities will need to file, at least annually, this information with the Registrar of Companies, which will then be held on a searchable central public register. The presumption is that information will be publicly accessible. There is a protection regime for individuals requiring protection, but this will only be capable of being used in very narrow circumstances. The objective of the regime is to increase transparency over who owns and controls UK corporates.
The legislation creating the new part 21A to the Companies Act 2006 was passed on 26 March 2015 and the advanced draft of the guidance has been circulated, together with the principal supporting statutory instruments. All will be finalised shortly, leaving affected entities and potential people with significant control a period of approximately three months to put in place full compliance with this new regime. Many affected entities will need to undertake urgent and significant work to comply.
For many affected entities compliance with the PSC regime will be very simple, because the person(s) with significant control will follow the ownership structure (most affected entities are wholly owned companies, without special share rights). However, where there is a complicated ownership and/or control structure, significant work will be required. All affected entities will need to evidence the compliance work they have carried out, with the evidence base for conclusions which have been reached. The timescale is very tight and where it will be necessary to deal with overseas investors, trustees and those not directly involved in the business on a day-to-day basis, it is important to think ahead.
The new criminal penalties and civil sanctions are heavy: any person who fails to comply with obligations under the regime (the person with significant control, the company officers and anyone else who receives a request for information) can face imprisonment for up to two years and shareholders who fail to co-operate with the regime may find their shares effectively disenfranchised. Effective share disenfranchisement gives the new regime an extra-territorial reach.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.