Basic requirement
All limited liability companies are required to register at Companies House and deliver a confirmation statement to the Registrar of Companies each year detailing any changes to the shareholders and their shareholdings and the directors (and company secretary if there is one). A company is also required to make certain filings at Companies House when it changes such things as its articles, officers, registered office, accounting reference date and share capital. Companies are also required to file annual accounts. All of this information is publicly accessible on the Companies House website. Solicitors practising in the area of company law frequently need to access this information in order to advise their clients.
People with significant control
From 6 April 2016, the ‘people with significant control’ (‘PSC’) regime came into effect in the UK, obliging most UK companies (and LLPs) to maintain a register of PSCs and from 30 June 2016 to supply to Companies House the information on this register along with the company’s confirmation statement, which replaces the previous annual return that companies were required to file. New companies need to supply this information on incorporation.
The PSC regime is set out in Part 21A Companies Act 2006 (CA 2006). It applies to all UK companies apart from those with shares listed on the Main Market of the London Stock Exchange (as these companies are already subject to similar requirements under the LPDT rules. To be a PSC, an individual must meet one or more of the five conditions set out in Part 1 of Schedule 1A CA 2006, which are set out below. Where the owner or controller of a UK company is a legal entity such as a company or LLP, that legal entity will need to be put on the PSC register if it is a registrable relevant legal entity (‘RLE’).
Definition of PSC (Part 1, Schedule 1A CA 2006)
A person with significant control over a company is an individual who meets one or more of the following conditions:
- The person holds, directly or indirectly, more than 25% of the shares in the company;
- The person holds, directly or indirectly, more than 25% of the voting rights in the company;
- The person holds the right, directly or indirectly, to appoint or remove a majority of the board of directors of the company;
- The person otherwise has the right to exercise, or actually exercises, significant influence or control over the company;
- The person has the right to exercise, or actually exercises, significant influence or control over an arrangement such as a trust, which is not a legal entity but which meets any of the other specified conditions in relation to the company or would do so if it were an individual.
Definition of RLE
Where an owner or controller of a UK company is a legal entity, it will need to be put on the company’s PSC register if it is an RLE. This depends on two factors:
- It would have met one of the conditions for being a PSC if it had been an individual and is itself an entity that is subject to the PSC regime or is a listed company; and
- It is the first relevant legal entity in the company’s ownership chain.
For example, if a UK company, A, is wholly owned by another UK company, B, only company B needs to be entered on company A’s PSC register as a RLE. It is not necessary for A to trace ownership up the corporate chain beyond B (for example, if B is wholly owned by company C, company C does not need to appear on the PSC register of company A). This is because information about the ownership of company B can be found on B’s PSC register.
Duty and sanctions
Section 790D CA 2006 imposes a duty on companies to take reasonable steps to identify their PSCs and RLEs. Failure to do so is a criminal offence, which can be committed by the company and any officer in default, with a maximum penalty of a fine or up to two years’ imprisonment. There is also a duty on PSCs and RLEs to notify the company of their status within one month of becoming a PSC or RLE, and it is also a criminal offence to fail to do so (s.790G CA 2006). Companies, PSCs and RLEs also have a duty to keep the company’s PSC register up to date by serving notice as soon as reasonably practicable if a change in circumstances occurs. From 26 June 2017, entities have to update their PSC register within 14 days of any changes and notify Companies House within another 14 days. This requirement was introduced as a result of changes to the UK’s anti-money laundering legislation.