Just before the general election, a rather misleadingly-titled piece of legislation slipped into law in the form of the Small Business, Enterprise and Employment Act 2015. This legislation is better described as a Companies Act (Amendment) Act because that is what it really is, adding about 5% to the canon of English company law. The new Part 21A to Companies Act 2006 sets out a new structure and obligation on most companies to maintain a register of people with significant control (the PSC register).
But I had heard that quoted companies were exempt?
Indeed they are. If your company is obliged to report under DTR 5 (Official List companies and those on AIM and the ISDX Growth Market) you only need to do one thing: to create a PSC register and set out on its face that the Company is not obliged to make any entry onto such register, by reason of its exemption as a DTR5 Issuer.
However, the DTR5 exemption only apples to the company with traded securities, not each member of the group. Unfortunately, it is therefore necessary for each of the DTR5 company's subsidiary companies incorporated in any part of the UK to prepare and maintain a PSC register.
The PSC register will contain the names of either natural persons and certain legal persons (such as public sector bodies) as persons with significant control or corporate bodies as registrable relevant legal entities. The language and detail of the legislation is complex.
From 6 April 2016, all UK companies will need to create and maintain a new publically accessible statutory register that records all of the people or legal entities that have significant influence or control over it.
Key provisions for the PSC register
Under the new PSC register regime companies who are not otherwise exempt will need to:
- find out whether there are any people with significant control over it;
- contact those persons to confirm the position and to obtain certain required information;
- create and maintain its PSC register; and (from 6 April 2016); and
- deliver the PSC register information to Companies House for inclusion on a searchable public register (from 30 June 2016).
Shareholders will be under a general obligation to voluntarily provide required information to companies to support the creation of the PSC register. Shareholders who fail to comply with this new regime are likely to have their share rights suspended and face criminal liability.
Persons with Significant Control (PSCs) and Relevant Legal Entities (RLEs)
A PSC or an RLE is someone that meets one of five specified conditions set out in the new schedule 1A to the Companies Act 2006. The table below sets out a brief description of each of the specified conditions.
|The Specified Conditions (as set out in part 1, schedule 1A Companies Act 2006)
|Condition 1: Ownership of shares
||directly or indirectly holds more than 25% of the share capital
|Condition 2: Ownership of voting rights
||directly or indirectly holds more than 25% of the voting rights
|Condition 3: Ownership of right to appoint or remove directors
||directly or indirectly holds the right to appoint or remove the majority of the board of directors
|Condition 4: Significant influence or control
||has the right to exercise or actually exercises significant influence of control
|Condition 5: Trusts, partnerships etc.
||has the right to exercise or actually exercises significant influence or control over a trust or firm that is not a legal entity, which in turn satisfies any of the above conditions
It gets worse
Unfortunately, the DTR5 exemption only provides a temporary reprieve, because once the 4th EU anti-money laundering directive comes into force (July 2017), the exemption for AIM and ISDX Growth Companies will fall away and only Official List companies will benefit from the DTR5 exemption.
This article was written by Edward Craft of Wedlake Bell LLP. For more information please contact Edward Craft, Wedlake Bell, or Peter Swabey, ICSA. Peter Swabey and Edward Craft, each a member of the Quoted Companies Alliance Corporate Governance Expert Group, have been sitting on the committee supporting BIS in the development of the guidance to this new legislation. The guidance is likely to be issued in January 2016.