New register and filings required for UK companies, LLPs and SEs – criminal sanctions for non-compliance
Part 21A of the Companies Act 2006 comes into force on 6 April 2016. This requires all UK companies, LLPs and societates europaeae to maintain a register of people (natural persons) who exercise significant control over the entity (“PSCs”) and to include on the register details also of registrable relevant legal entities (“RLEs”). These rules, which are aimed at increasing transparency, apply as much to dormant entities as to active ones.
In relation to a company limited by shares, a PSC is someone who:
- Directly or indirectly holds more than 25% of the shares;
- Directly or indirectly holds more than 25% of the voting rights;
- Directly or indirectly holds the right to appoint or remove a majority of directors;
- Otherwise has the right to exercise, or actually exercises, significant influence or control; 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, but would itself satisfy any of the first four conditions if it were an individual.
The information collected by companies will need to be included on annual returns (to be renamed “confirmation statements”) from June 2016. The information filed with Companies House (other than the home address of the PSC) will be public, although it will be possible for PSCs to apply to be excluded from the public register where they have a legitimate reason to do so (for example, that they may be targeted by activists).
As noted above, the PSC register and filings will also need to include details of “relevant legal entities” (or “RLEs”). An RLE is defined as a corporate body that is subject to its own disclosure requirements and that would be a PSC, were it an individual. This means, for example, that a UK company (A) that holds more than 25% of the shares of another UK company (B) will need to be included in B’s register as an RLE. Where more than one entity in a company’s ownership chain could be regarded as an RLE, only the first (the next up the chain) is registrable.
Corporations (other than a corporation sole) are not subject to disclosure requirements under Part 21A, which means that most universities will not need to appear on the PSC registers of companies in which they have an interest, but this does not mean that they can ignore the regime for the following reasons:
- Even where there is no PSC or RLE, a register must still be maintained. In this case the register would make the positive statement that no one needs to be entered into it.
- Although the university may not be an RLE, it does not mean that other shareholders should not appear as PSCs or RLEs, even where the university is the dominant party. If the individuals or entities satisfy the criteria to be PSCs or RLEs they must appear on the register even if the university does not have to appear on it.
- The criteria for being an RLE or a PSC go beyond mere ownership and include whether individuals or relevant legal entities have the right to appoint management or actually exercise control. Thus it may be the case that an individual who exercises the university’s control rights over a company will need to be registered as a PSC even though the university on whose behalf they are exercised does not.
- Failure to comply may lead to fines and/or imprisonment.
BIS has the responsibility of publishing statutory guidance on the PSC regime, which is here: https://www.gov.uk/government/publications/guidance-to-the-people-with-significant-control-requirements-for-companies-and-limited-liability-partnerships
If you are in any doubt how to proceed, please contact the author or your relationship partner at Mills & Reeve.