PSC regime | Companies must remain up to date with requirements to avoid penalties

The UK People with Significant Control (PSC) regime was introduced in April 2016 to enhance the transparency of ultimate (beneficial) ownership of UK companies. Under the regime, every company that is subject to Part 21A of the Companies Act 2006 is required to produce, keep and maintain a PSC register, except where they are exempt. This also includes Societas Europaea and limited liability partnerships.

What is a PSC register?

A PSC register is a dedicated register of people with significant control over that company. Although eligible Scottish partnerships are not required to keep their own register, they must file their PSC information with the central public register at Companies House instead.

What are the requirements for being a PSC?

A person with significant control is an individual who meets one or more of the following:

• They hold more than 25% of the shares in the company, either directly or indirectly;
• They hold more than 25% of the voting rights in the company, either directly or indirectly;
• They hold the right to appoint or remove a majority of the board of directors of the company, either directly or indirectly;
• They have the right to exercise, or actually exercise, significant control or have influence over the company.
• They have the right to exercise, or actually exercise, significant influence or control over the activities of a trust or firm that is not a legal entity. This would itself meet one or more of the conditions above, or would do so if it were an individual.

What is a registrable relevant legal entity?

If the owner or controller of a UK-incorporated company is a legal entity rather than an individual (for example, a company or LLP), that legal entity will need to be put on the company’s PSC register as a registrable relevant legal entity (RRLE) in relation to the company. It will be registrable if it is the first relevant legal entity (RLE) in the company’s ownership chain.

Whether such an entity is an RRLE will depend on the following:

1. Disclosure requirements – It is ‘subject to its own disclosure requirements, which means that the legal entity is covered by the regime and so has to maintain its own PSC register or is otherwise subject to DTR5; or
2. Voting shares – It has voting shares admitted to trading on a regulated market, so is therefore subject to an equivalent disclosure regime. Regulated markets include:
   • The UK;
   • The European Economic Area (EEA) state; or
   • One of the specified markets in Japan, the United States of America, Switzerland or Israel. A list of specified markets for each country can be found in Schedule 1 to The Register of People with Significant Control Regulations 2016.

What is classed as an indirect interest?

A person holds an indirect interest if they have a ‘majority stake’ in a legal entity and that entity either:

• holds the shares or right directly; or
• is part of a chain of legal entities, each of which has a majority stake in the entity immediately below it, except for the last one which holds the shares or right.

To have a ‘majority stake’, a person:

• must hold a majority of the voting rights in the legal entity;
• is a member of the legal entity and has the right to appoint or remove a majority of its board of directors;
• is a member of the legal entity and controls a majority of the voting rights by agreement with other shareholders or members; or
• has the right to exercise, or actually exercises, dominant influence or control over the legal entity.

An individual does not have to be registered as a PSC in a company’s PSC register if the individual’s ‘controlling’ position or interest in the company is held indirectly through one or more legal entities, at least one of which is an RLE. In this situation, the company must reflect in its PSC register only the first RLE nearest to it in the chain, i.e. the RRLE.

What is a joint interest?

If two or more people hold the same shares or rights in the company, the company must work on the basis that each of them holds the total number of shares or rights held by all of them. For example, if two or more people jointly hold more than 25% of the shares or voting rights, each of them must separately be entered on the PSC register.

What about spouses?

There is nothing in the legislation that deems shares or rights held by spouses to be combined for the purposes of the PSC regime. Therefore, if a husband and wife hold shares under their own names, and if each of the holdings is less than 25%, then no disclosures need to be made.

What information is required on the register?

* Residential address details will generally not be available to the public, However, in exceptional circumstances where there is a serious risk of violence or intimidation, a company can apply to prevent any information relating to a PSC from being made public or shared (this information ca still be shared with law enforcement agencies).

Filings to Companies House

Any changes to the PSC information in the company’s PSC register, such as a change of personal details or nature of control, must be filed at Companies House.

An update on the PSC register must be carried out within 14 days of the change. Following the implementation of the revised PSC regime in 2017, these changes must then be filed to Companies House within a further 14 days.

Inspection of the PSC register

The PSC register must be available for inspection at the company’s registered office or a single alternative inspection location (SAIL).

Anyone can request to inspect the register free of charge, and copies must be provided on request. The company can charge a fee for a copy, but only a maximum of £12 for each one.

Amended regulations

On 23 June 2017, the government published the Information about People with Significant Control (Amendment) Regulations 2017, which stated that changes to the PSC regime were required in order for the UK to comply with the beneficial ownership disclosure requirements of the EU Fourth Money Laundering Directive.

The amended regulations came into force on 26 June 2017. Prior to this date, companies were only required to notify Companies House of changes to their PSC register by filing a confirmation statement on an annual basis.

What were the key changes?

• PSC filings: In addition to updating its PSC register within 14 days of any change occurring, a company must also notify Companies House of such changes within a further 14 days by filing forms PSC01 to PSC09 where applicable. If a private company has elected to keep its own PSC register at Companies House, the PSC information must be kept up to date in the same way as if the company was maintaining its own register. PSC information must therefore be updated at Companies House as soon as it would have been entered into the company’s own register.
• AIM companies: As of 24 July 2017, AIM-listed companies and NEX-listed companies are required to adhere to the PSC regime and have to maintain a PSC register. These companies are required to update their PSC status on their PSC register within 14 days and then notify Companies House by filing the relevant statutory forms within 14 days of making the entry to the PSC register.
• Limited Partnerships: As of 24 July 2017, eligible limited partnerships registered in Scotland and general partnerships constituted under the law of Scotland (together ESPs) are also required to file their PSC information with the central public registry at Companies House within a period of 14 days. However, they are not required to keep their own PSC registers.

What happens if the obligations under the PSC regime are not met?

Failure to comply constitutes a criminal offence and therefore could result in a fine or a prison sentence of up to two years (or both for a company officer). Therefore it is essential that a company is up to speed with its responsibilities under the PSC regime.