New rules have now been introduced as part of the UK’s implementation of the EU Fourth Anti-Money Laundering Directive aimed at tackling money laundering and the financing of terrorism, and businesses are required to help police the system by supplying information about people with significant control (PSCs).
In this blog, you’ll find out who might be classed as a PSC in your business and what steps you need to take to ensure you meet the new requirements – failure to do so is a criminal offence.
Overview of changes
There are three main areas of change:
- how companies and limited liability partnerships (LLPs) report PSC information to Companies House;
- changes to exemptions; and
- bringing some partnerships governed by the law of Scotland into the regime.
There is information on each of these areas of change below. Visit the Companies House website to see the rules defining who counts as a PSC.
Who does this affect?
The new rules came into force from 26 June 2017, with further amendments made on 24 July 2017, and affect companies and LLPs.
In 2016, UK companies and LLPs were required to keep a register of people with significant control, known as the PSC Register, and to file relevant information at Companies House.
Under the old rules, some companies were exempt from the PSC rules. These were DTR5 companies which are not on a regulated market.
Under the new rules, such companies may have to comply. This could affect Alternative Investment Market companies (AIM) and ISDX (ICAP Securities and Derivatives Exchange) companies. If the company has traded on an EEA or Schedule 1 specified market, it is still exempt from providing PSC information.
There are also changes for Scottish limited partnerships and certain Scottish general partnerships, collectively referred to as ‘eligible Scottish partnerships’. This blog does not cover eligible Scottish partnerships but you can find more information here.
Who are the ‘people with significant control?’
A PSC is defined as an individual who:
- holds, directly or indirectly, more than 25% of the shares or voting rights in the company; or
- holds the right, directly or indirectly, to appoint or remove a majority of the board of directors of the company; or
- has the right to exercise, or actually exercises, significant influence or control over the company.
Where a trust or firm would satisfy any of the above conditions, the trustees of the trust or members of the firm are PSCs. Any individual that has the right to exercise, or actually exercises, significant influence or control over the activities of that trust or firm, may be a PSC.
While many companies will find the identification of PSCs relatively straight forward, where for example the company is part of a group or where there are agreements to vote or exercise rights jointly, different rules apply for the information required to be obtained, confirmed and recorded on the PSC register.
For LLPs, a PSC is an individual who meets one or more of the following conditions in relation to the LLP:
- directly or indirectly holds rights over more than 25% of the surplus assets on a winding up;
- directly or indirectly holds more than 25% of the voting rights;
- directly or indirectly holds the right to appoint or remove the majority of those involved in management;
- otherwise has the right to exercise, or actually exercises, significant influence or control;
- holds the right to exercise, or actually exercises, significant influence or control over the activities of a trust or firm which is not a legal entity, but would itself satisfy any of the first four conditions if it were an individual.
Changes in reporting
There are new timescales and new forms. Previously, PSC information was updated annually on confirmation statement CS01. Change is now event-driven and must be reported to Companies House whenever it occurs. It can no longer wait until the end of the year.
When the annual confirmation statement is made, confirmation will be required that PSC information which Companies House already holds is accurate.
There are 14 days to update the PSC register, and another 14 days to send the information to Companies House. That gives 28 days to notify Companies House of changes to the PSC register.
Is further guidance available?
The Department of Business, Energy and Industrial Strategy has updated its guidance on the PSC register. There is draft statutory guidance on what ‘significant influence or control’ means for eligible Scottish partnerships, and guidance for people with significant control.
How we can help
This is a complex area, especially if you are coming into the regime for the first time. It can also be a risky area, as failure to comply with the rules could lead to the business, its directors or partners, or identified PSCs committing a criminal offence.
If you would like to discuss these new requirements in more detail, or require assistance with this or other company secretarial requirement please contact us by email or give us a call on 01788 577613 (Rugby office) or 01908 564701 (Stony Stratford office).