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13th June 2017



What you need to know about Companies House’s upcoming changes to its PSC register

Companies House is making important changes to the way in which persons with significant control (PSC) of UK companies are identified and the timings for filing PSC information.  The changes are being driven by the European Union’s Fourth Anti-Money Laundering Directive (Directive), which requires implementation in local law by the 26 June 2017.

 

The subordinate legislation necessary to give effect to the Directive has not yet been passed in full by Parliament due to the recent election, which means there is likely to be a delay in implementing some of the changes, but other changes are already in progress.  Here’s our overview of what you need to know.

The current PSC regime
The existing PSC regime came into force in March 2016.  It stipulates that all limited liability partnerships and most limited companies in England and Wales must identify those persons who control more than 25% of their share capital or voting rights, the power to appoint or remove the majority of the board or exercise significant influence over the board, whether,directly or indirectly. In this context, a ‘person’ can be an individual or a corporate entity that is subject to the PSC regime (or is listed on certain regulated stock exchanges).

Under the current system, you need to identify PSC at incorporation, and annually thereafter when filing your confirmation statement at Companies House.  As such, the register currently provides a snapshot of information, rather than an up-to-date resource.

What is changing?
Under the directive, there will be two significant changes.

The first key area of change relates to the scope of companies required to maintain a PSC register.

Currently, companies listed on the London Stock Exchange or AIM are exempt for requirements to keep a PSC register.  It is expected that such companies will lose this exemption under the new rules.  This will mean that, in addition to listing requirements regarding beneficial ownership, these companies will also have to file information at Companies House.

The new rules will also be expanded to capture more Scottish corporate entities. In Scotland, partnerships and limited partnerships have separate legal identities but they will both now be captured by the regime.  The legislation to implement this change has already been passed and it is coming into force with effect from 24 July 2017. The changemay be particularly relevant to companies with private equity investments, as private equity firms often structure themselves using Scottish limited partnerships.

The second key area of change relates to the timings within which entities are required to file and record PSC information.  Instead of filing this annually, there will now be an ongoing obligation to keep the register up-to-date. As soon as changes occur to an individual or entity’s status as a PSC – whether due to an increase or a decrease in control, or a change in the nature of their control – a company has 14 days to update its internal register and a further 14 days to update the register at Companies House.

At present, it’s not clear how compliance will be policed. However, it seems likely that the current regime of fines will remain in place.

Will Brexit have an impact?
Although these changes are being implemented through an EU directive, the UK government has made clear its desire to achieve a comparable level of transparency.  So, while the underlying EU directive will fall away after Britain exits the EU, the legislation is unlikely to change. In fact it’s probable we’ll see further measures to enhance transparency.  The Conservative manifesto sets out the party’s aim to examine the takeover process of listed companies within the UK.  If the Conservatives remain in government after the election, it’s likely that changes will be made requiring more details of the beneficial ownership of bidders for companies on either the London Stock Exchange or the AIM – enabling investigations into whether the beneficial owners are suitable to own UK-listed companies.

Assessing the wider context, it’s clear the upcoming changes at Companies House are indicative of the government’s longer-term objectives, rather than merely a result of EU legislation imposed upon the UK.

How the changes may impact clients
The new requirements from Companies House will impact clients who are required to maintain a PSC register, and file this information with Companies House.

Instead of recording PSC information annually, you will need to update the PSC register  and complete a filing at Companies House as soon as any alterations occur to your share capital which result in changes towho has significant controlWe also anticipate changes to the Companies House’s registration process, following concerns raised about the way data is provided and its subsequent quality. At present, information is entered through a free-text box. However, without restrictions on the way information is inputted, there has been a concerning volume of anomalous results.  It’s likely Companies House will replace the free-text boxes with drop-down boxes, establishing a limited number of choices, so that the data entered is more accurate.

There is also ongoing concern that the data received so far may, in places, have been filed with a view to hiding details of the true beneficial owners. As such, Companies House may become stricter when assessing information, to ensure it meets requirements.  Where information doesn’t meet requirements, it’s likely the registrar will question companies to make sure they have complied with their obligations and provided full and proper disclosure of their beneficial owners.  We recommend clients take the necessary steps to ensure the information they provide to Companies House is comprehensive and accurate.

Clients should be aware that as a result of the broadened range of companies captured by the new PSC requirements, if they have invested in companies listing on the London Stock Exchange or AIM, or invested in private equity firms structured through Scottish limited partnerships, they may find that their names appear on PSC registers.

Getting in contact
At Thrings, we can advise you on the steps you should be taking to determine who in your company is a PSC.  We can also help you to file this information. To learn more about these changes or for advice or assistance, get in touch with John Richardson.

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About The Author

John Richardson - 																					Partner

John Richardson
Partner

The Paragon
Counterslip
Bristol BS1 6BX

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