The people with significant control (PSC) regime was introduced in the UK in April 2016 with a view to improving transparency about who owns and controls UK companies.
The regime brought in important changes to the reporting requirements of UK companies; a company now has to look beyond its shareholders and directors, and report on those individuals and entities who actually exercise significant control over the company. Nearly four years on, although the vast majority of companies have filed PSC information with Companies House, it appears that some of those companies still don't fully understand the requirements.
The PSC regime requires most UK companies to keep and maintain a PSC register in addition to filing their PSC information with Companies House. Failure to comply with the PSC regime risks criminal prosecution, and may result in a fine or possible imprisonment, so it is important that companies identify their PSCs and keep their records up to date.
As a reminder, a PSC is an individual who meets one or more of the following criteria in relation to a company:-
- 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 the board of directors;
- has the right to exercise, or actually exercises, significant influence or control over the company; or
- has the right to exercise, or actually exercises, significant influence or control over a trust or a firm that is not a legal entity but which itself satisfies any of the above four criteria.
If you are a business owner, although you may have drawn up your company's PSC register and notified Companies House at the time of the regime's introduction, it is possible that the PSC requirements have fallen off your radar in the last few years. Certainly I have come across several companies with PSC filings on Companies House which were undoubtedly correct at one time, but have since become inaccurate following a transaction.
When transactions take place which affect a company's shareholding - such as a transfer of shares, share buyback or exercise of an option - it is important to consider the effect this has on your company's PSC register. For example, if a shareholder leaves the company and transfers all of their shares to another shareholder, a person who was previously a PSC may no longer qualify, or a PSC's nature of control may have changed. If there is such a change, you must ensure that your company's PSC register is updated within 14 days and Companies House is notified within a further 14 days. It is not sufficient to wait and update your company's PSC information in the annual confirmation statement.
If your company has been involved in a transaction recently and you haven't turned your attention to the PSC register, then now might be a good time to check your records and attend to any updates that are overdue. If you would like assistance with this or any other compliance matters, please feel free to get in touch with us.
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