Download our FREE Share Scheme Administration Fact Sheet:
Keeping crime down with good admin!
As you may be aware, from April 2016 all non-listed companies and LLPs need to keep a register of "people with significant control" (PSC register), in addition to the register of directors and register of members (shareholders), and must file PSC information with the central public register at Companies House. The requirements in relation to PSCs can be found in the new Part 21A of the Companies Act 2006 (as introduced by the Small Business, Enterprise and Employment Act 2015) and were aimed at identifying individuals (or governments) who ultimately control UK companies.
Broadly speaking, a PSC is an individual who, in relation to a company:
- directly or indirectly owns more than 25% of its shares;
- directly or indirectly holds more than 25% of the company's voting rights;
- holds the right, directly or indirectly, to appoint or remove a majority of the board of directors of the company;
- has the right to exercise, or actually exercises, significant influence or control over the company;
- exercises or has the right to exercise significant influence or control over the activities of a trust or firm which itself meets (or would meet, were it an individual) one or more of the first four conditions.
Companies will also need to disclose in their PSC registers details about the "registrable relevant legal entities" which own or control them (e.g. if there was a non UK company in a chain of other UK group companies).
Once details of PSCs are recorded on the PSC register, an officer of the company is required to provide this information to Companies House as part of the Confirmation Statement (formerly known as the “Annual Return”). Updating of the PSC register should take place when the pertinent information changes, and then at Companies House when the next Confirmation Statement is made. As a separate but related matter, companies will be able to opt to keep certain statutory registers at Companies House rather than holding their own statutory registers and this would include the PSC register.
If a company encounters a situation where a PSC does not respond to a request for information, the company may be able to prevent transfers of the underlying shares and stop paying dividends on them by following a set legislative procedure.
From June 2016, the information on the PSC register will be searchable online at Companies House and therefore it is important that this information is as up to date as possible. Failure to provide accurate information on the register and failure to comply with notices for information are criminal offences and may result in a fine and/or a prison sentence of up to 2 years.
Accordingly, it is now even more important to ensure that you are on top of your share scheme administration as equity arrangements that have been entered into could impact on whether an entry on the PSC register is required (with the requisite confirmation of such information with Companies House).