Operating under the PSC Regime
Last year the new Part 21A was introduced into the Companies Act 2006, creating a new regime for almost all companies incorporated in any part of the UK to create and maintain a register of people with significant control (the PSC register regime).
The first two important PSC register regime deadlines have now passed:
6 April 2016
companies within scope needed to ensure that they put in place a register of persons with significant control, even if incomplete
6 May 2016
all persons who believe themselves to be people with significant control had one month to declare themselves to the relevant companies
Those registrable persons who have not yet declared themselves need to do so before 5 June 2016, lest they commit a criminal offence. If a legal entity is registrable, the officers will also commit a criminal offence.
From 30 June 2016 PSC register information will start to be filed with the Registrar of Companies and available publicly as part of the check and confirm statement (the replacement of the annual return).
Obligation on company to take reasonable steps to ensure compliance
The PSC register regime does not anticipate complete information being in place immediately, but companies need to take reasonable steps to obtain the appropriate information and have a complete register in place.
Where a company has not either been in communication with those it believes to be its people with significant control or its registrable relevant legal entities (either which may or may not be shareholders) or such persons have not made themselves known to the company, the company needs to start considering using the powers given to it under the PSC register regime to make demands with menaces.
A registrable person is someone who has the right to exercise, or actually exercises "significant influence or control" as such term has been construed for these purposes. Those who are behind companies and have not yet ensured compliance need to act now. It is also important to note that the test applicable for a person with significant influence or control for PSC register regime purposes is distinct from that contained in the anti-money laundering regime, which focusses on a different class of persons (the ultimate beneficial owners).
Warning notices and restrictions notices
A company needs to take reasonable steps to ensure compliance with the regime. The most efficient and effective thing for a company to do is to speak to its shareholders. Indeed, when the fourth EU anti-money laundering regulation comes into effect in the middle of 2017, companies will be under a greater responsibility to understand its ultimate beneficial owners.
If a company has reasonable grounds to believe that relevant information has not been provided it needs to consider using the levers provided to it under the PSC register regime. Companies must now start adding menaces to their request for engagement with persons with significant control. The menaces are rather unappealing to investors.
Where a company's efforts are proving fruitless, the company will then need to consider issuing a warning notice and then later a restrictions notice which will have a dramatic effect in relation to a share.
A share subject to a restrictions notice:
- cannot be transferred;
- cannot receive any distribution of capital or income (other than on a liquidation);
- cannot be voted upon; and
- cannot participate in a rights issue.
There is a relief regime for the protection of innocent third parties, but it is difficult to see how this could be used in many cases.
In due course, it will be useful to observe what behaviours will change as a result of the new PSC register regime, particularly the fact that most of the people with significant control register information will be freely available to members of the public. It is almost certain that there will be a challenge as to the propriety of use of a restrictions notice. A specific objective of the PSC register regime legislation is to make it harder for people to seek to hide assets and make ownership opaque. Information on people with significant control will clearly become common currency in corporate transactions. In the coming years, we expect to see the information on significant control being used in a wider non-company law context, including commercial litigation, taxation disputes, estate disputes and matrimonial proceedings: this will be interesting to observe.
For further information please contact Edward Craft at firstname.lastname@example.org.