These Regulations change the existing rules regarding persons with significant control (PSCs) of corporate entities. Designed to ensure the United Kingdom's compliance with the Fourth Money Laundering Directive, these changes will have a significant effect for UK companies, Scottish limited partnerships and some Scottish general partnerships.
Since April 2016, and the introduction of the Small Business, Enterprise and Employment Act 2015 ("SBEE"), most UK companies have been required to maintain a register of people who have significant control over the company ("PSCs").
While the PSC regime was designed to improve transparency, it did not go far enough to meet the UK's obligations under the EU's Fourth Money Laundering Directive (the "Directive"). Accordingly, the Government, after consultation, decided upon certain changes to ensure the UK's compliance with the Directive.
These changes have now been implemented by the Information about People with Significant Control (Amendment) Regulations 2017 and the Scottish Partnerships (Register of People with Significant Control) Regulations 2017 (together the "Regulations").
The Regulations, in combination with the SBEE and associated legislation, should lead to a full and current national register of the beneficial owners of the majority of legal entities in the UK, in satisfaction of the Directive. Unusually, the Regulations were made on 22 June, laid before Parliament on 23 June and came into force on 26 June. This unusually short timetable was required in order to ensure the UK's compliance with the deadline for implementation of the Directive, but it has left organisations affected by the rules with little time to get to grips with the changes.
Companies covered by the PSC rules
The PSC regime under the SBEE applied to most, but not all, UK companies. Excluded from the regime were companies already subject to other extensive disclosure requirements such as AIM listed companies.
In terms of the Regulations, the only UK companies now exempt from keeping a PSC register are:
This means that from 24 July 2017 an issuer to which Chapter 5 of the Disclosure and Transparency Rules sourcebook applies, including AIM listed companies, will be required to maintain a PSC register for the first time.
Other entities covered by the PSC rules
Since 2016, the PSC regime has applied to limited liability partnerships ("LLPs") as well as to UK companies. However, the Directive requires all "corporate and legal entities incorporated in the UK" to maintain records of their beneficial owners. This is wider than the definition used in the SBEE and has led to a reconsideration of which entities should be subject to the PSC rules.
The Regulations mean that from 24 July 2017, as well as companies and LLPs, the following legal entities will be required to identify their PSCs:
These entities will not be required to maintain a PSC register themselves but will be required to notify Companies House of its PSCs on registration, in an annual confirmation statement and when there are any changes to the PSCs.
General Scottish partnerships to whom the Regulations apply as at 24 July 2017 will have 14 days from that date in which to register with Companies House. Going forward, all new Scottish partnerships which are subject to the Regulations will register with Companies House.
An individual will be a PSC of a general Scottish partnership or a Scottish limited partnership if he meets any of the following conditions:
- is the trustee of a trust or a member of a firm that:
- under the law by which it is governed, is not a legal person; and
- meets any of the other specified conditions (in their capacity as such) in relation to the partnership; and
- has the right to exercise, or actually exercises, significant influence or control over the activities of that trust or firm.
A company or an LLP can keep its own PSC register, along with its other statutory registers, or can elect for the register to be held centrally by Companies House. PSC registers kept centrally are publicly available, on the Companies House website.
Companies and LLP subject to the PSC regime must provide Companies House with details of the PSCs at the point of incorporation. Thereafter, every company and LLP is obliged to file a confirmation statement (forms CS01 or LL CS01) at least annually. This replaced the old annual return and adds the additional requirement to provide details of the company's PSC. Companies and LLPs can choose to file additional confirmation statements throughout the year, if they wish to do so.
Under the previous rules, the company or LLP was required to update its own PSC register as soon as reasonably practicable after they become aware of any change in the PSC information. However, they were only obliged to inform Companies House when they next filed a confirmation statement. This meant that the PSC information which Companies House had on record could be up to one year out of date. In contrast, the Directive requires beneficial ownership information to be "current".
In terms of the Regulations, PSC information will now need to be updated much more frequently.
Where there is any change to the PSC information:
- update its own PSC register within 14 days; and
- inform Companies House within 14 days of updating its PSC register; and
Failure to comply with these obligations result in an offence having been committed by the entity and by every officer of the company who is in default.
Companies House forms PSC01 to PSC09 for companies, LL PSC01 - PSC09 for LLPs and LP5(s), LP6 and LP7(s) for Scottish limited partnerships will be used to inform Companies House of any changes in the PSC information.
The majority of the obligations introduction by the Regulations and the Scottish Regulations will not apply until 24 July 2017. However, all entities affected by these changes will need to ensure that they are familiar with the new requirements and that their PSC information is accurate before then.
Many of these changes are very complex and represent completely new obligations for the entities involved. We expect that many organisations will find compliance a challenge and we would be happy to provide assistance with these changes.