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UK: The PSC Register and its implications




It has been almost two years since the introduction of the Persons with Significant Control Register (the ?PSC Register?) in the UK, but it is quickly evident during due diligence exercises that not all directors have a clear understanding of their obligations

The PSC Register is designed to ensure the ownership of corporate bodies in the UK is known publicly, with penalties for those who do not provide such information. Since the EU?s Fourth Money Laundering Directive passed the deadline for transposition in EU member states last summer (June 2017), all EU companies will be subject to broadly similar rules. Outside Europe, however, such publications are not always necessary. In the UK, companies (with only a few exceptions for publicly traded companies) are required to keep a register of ?people with significant control over the company? and to make that public. Whether or not a person has ?significant control? is determined, in its simplest form, by whether that person (a ?PSC?):

1. owns more than 25 percent of the shares in the company (or has a right to more than 25 percent of the profits)

2. has more than 25 percent of the voting rights

3. is able to appoint or remove a majority of the directors

4. has the right to, or does, exercise significant influence or control (but this will only be relevant where none of 1, 2 or 3 apply), and/or

5. has the right to, or does, exercise significant influence or control over the activities of a trust or firm which is not a legal identity, but would, in its own right, satisfy any of 1, 2, 3 or 4 if it were an individual.

How this applies to RLEs

Similar rules apply to other companies, known as relevant legal entities (?RLEs?), which have ?significant control? over a subsidiary. A company is only considered a RLE, however, if it is also subject to PSC disclosure requirements. This ensures that the individual humans who actually control the subsidiary can ultimately be identified., Anyone investigating ultimate ownership of a subsidiary, therefore, can follow the chain of PSC Registers from the subsidiary through all of the RLE parent companies, to the ultimate PSC of the holding company. For clarity, once a company has found its own RLE(s), it is not required to report on that RLE?s ownership, reducing the administrative burdens on companies, although making it more difficult to find the ultimate PSC.

Registration of the information in the PSC Register

Company directors need to ensure that they have taken reasonable steps to identify the PSC(s) and/or RLE(s) (if any) of the company. This primarily involves asking presumed PSCs and RLE(s) to provide their information with the power to restrict the shareholder?s voting rights until such information is provided. Having done so, they must register this information in their PSC Register, alongside their other statutory registers. Alternatively, privately owned companies can opt to maintain their PSC Register directly with Companies House. Strictly speaking, directors who fail to do this could face imprisonment or a fine, warn the experts at Ecovis. In addition, PSCs and RLEs which know or ought reasonably to know they should be contained on the PSC Register should inform the company. If there are no PSCs or RLEs, a declaration evidencing this must be in the PSC Register.

In relation to updates, the timetable is relatively short. Companies have just 14 days from the date of a transaction or change to update their PSC Register and, thereafter, have another 14 days to update Companies House. The net effect of this is that all transactions should be public within 28 days of completion, which will have ramifications for any companies, buyers or sellers trying to do something under the radar of third parties. Again, an offence is committed by every director if such updates are not made.

The system is not water-tight

Notwithstanding the above, there are questions as to the effectiveness of PSC Registers. Above all, there is no third party verification of the information contained therein, or of the details held by Companies House. Whilst it is an offence to submit false information to Companies House, it is unlikely to be subject to verification. This differs from some European states where more stringent reporting requirements are used. The consequence of this is that the system is open to abuse or, at the very least, negligent misuse. Ultimately, therefore, caution should be taken before relying on the contents of a PSC Register or Companies House filings.

Author

Matthew Devine, solicitor, Barlow Robbins LLP, Guildford, Surrey,

Ecovis is a leading global consulting firm with its origins in Continental Europe. It has over 5,000 people operating in over 60 countries. Its consulting focus and core competencies lie in the areas of tax consultation, accounting, auditing and legal advice.

The particular strength of Ecovis is the combination of personal advice at a local level with the general expertise of an international and interdisciplinary network of professionals. Every Ecovis office can rely on qualified specialists in the back offices as well as on the specific industrial or national know-how of all the Ecovis experts worldwide. This diversified expertise provides clients with effective support, especially in the fields of international transactions and investments ? from preparation in the client?s home country to support in the target country.

In its consulting work Ecovis concentrates mainly on mid-sized firms. Both nationally and internationally, its one-stop-shop concept ensures all-round support in legal, fiscal, managerial and administrative issues.

The name Ecovis, a combination of the terms economy and vision, expresses both its international character and its focus on the future and growth.





Posted by on 10. May 2018. Filed under Internet. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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