The United Kingdom’s New Disclosure Regime for Private and Public Companies

As part of the UK government’s efforts to increase transparency of UK companies’ ownership and control, starting on 6 April 2016, UK companies will be required to maintain a register (“PSC Register”) of people with significant control (“PSC”). Additionally, a requirement to file the information on public record will take effect from 30 June 2016.

Who is affected by the new rules?

This new rules apply to all UK incorporated companies (whether public or private) except those who are subject to Chapter 5 of the Financial Conduct Authority’s Disclosure and Transparency Rules (“DTR 5”) (ie. UK companies listed on a regulated market (including the LSE Main Market) or on a prescribed market which is not a regulated market (including AIM)) and those UK companies whose shares are traded on a regulated market in the EEA, or on a specified market in Israel, Japan, Switzerland or the US.

The rules also apply to UK incorporated limited liability partnerships and registered Societates Europaeae.

Who must be listed on the PSC Register?

The new rules require that UK companies assess beneficial ownership of their shares to identify and list on their PSC Register any PSCs and/or registrable relevant legal entities (“RLEs”).

A PSC is an individual who satisfies one or more of the following conditions:

  • directly or indirectly holds more than 25% of the shares;
  • directly or indirectly holds more than 25% of the voting rights;
  • directly or indirectly has the right to appoint or remove the majority of directors;
  • otherwise has the right to exercise, or actually exercises, significant influence or control; and/or
  • has the right to exercise, or actually exercises, significant influence or control over the activities of a trust or other entity which is not a legal person, which itself satisfies on or more of the above conditions.

An RLE will be registrable if it:

  • meets one or more of the specified conditions listed above; and
  • is either: (i) subject to the requirement to maintain a PSC Register;or(ii)subject to DTR 5; or (iii) has its voting shares admitted to trading on a regulated market in the EEA or on a specified market in Israel, Japan, Switzerland or the US.

What is an “indirect interest” for the purposes of the PSC regime?

An interest is considered to be held indirectly when a legal entity holds the relevant shares or rights and someone has a majority stake in that legal entity.

Someone will hold a majority stake if:

  • they hold a majority of the voting rights in the legal entity;
  • they are a member of the legal entity and have the right to appoint or remove a majority of its board of directors;
  • they are a member of the legal entity and control a majority of the voting rights by agreement with other shareholders or members; or
  • they have the right to exercise or actually exercise dominant influence or control over the legal entity.

What if we don’t have beneficial ownership information?

Companies must take reasonable steps to determine whether they have PSCs or registrable RLEs. For those companies that do not have easy access to beneficial ownership information, the new rules provide that they must make enquiries by issuing notices to persons whom they have reasonable cause to believe are PSCs or registrable RLEs or know the identity of any PSCs or registrable RLEs (or of someone else likely to have that knowledge).

The new rules may have difficult practical implications for certain UK companies if an overseas person who does not fall within UK jurisdiction refuses to comply with the notices. For example, a company could, under the new rules, have to issue a notice to a known professional advisor or service provider of an overseas person who is prevented from disclosing the information under the laws of the local jurisdiction.

To persuade people to provide the requested information, the rules provide companies with the power to impose restrictions on the relevant shares to prevent their sale and/or the exercise of any rights or payment of any sums due in respect thereof.

Do PSCs have any obligations pursuant to the PSC regime?

Pursuant to the new rules, individuals and registrable RLEs have an obligation to contact the relevant UK company one month after becoming a PSC or registrable RLE.

Is the information on the PSC Register public?

When a UK company completes its first Confirmation Statement with Companies House, it will need to provide PSC information and therefore, such information will now become available on the central public register. The Confirmation Statement replaces the Annual Return beginning 30 June 2016.

Anyone may have access to the PSC Register free of charge or request a copy for an optional fee by providing a request setting out certain prescribed information (including the purpose for seeking of the information). A response must be issued within 5 working days of the request being made. A company who wishes to refuse the request must apply to the court for a decision on compliance with the request.

What is the consequence of non-compliance?

Failure to comply with the provisions of the PSC regime is a criminal offence and may result in fines and/or imprisonment.

We have UK companies in our corporate structure, what should we do next?

Companies (including overseas companies with UK subsidiaries) should familiarise themselves with the PSC regime, start putting together a PSC Register template and ensure that they have in place processes to obtain, maintain and update the relevant information. It is important to note that the PSC regime is very specific as to content (in certain cases even prescribing specific wording).

Given the consequences of non-compliance, companies should seek legal advice if they have any uncertainty regarding the application of, or their obligations pursuant to the PSC regime.

This newsletter is for general information only and is not intended to provide legal advice. For further information regarding the PSC regime and how it may affect your organisation, you may contact Sarah Landry Maltais at [email protected].