From 30th June 2016 the ‘People with Significant Control’ Companies House register went live. This means that certain United Kingdom (UK) companies, Limited Liability Partnerships (LLPs), Societas Europaea (SE), and Eligible Scottish Partnerships (ESPs) are required to record certain details of their beneficial ownership. The idea is simple, by making publicly available information about ownership of companies, LLPs, SE, and ESPs, this increases transparency and ownership and control of UK firms; its helps investors with company investment decisions; and it also helps to tackle crime relating to inter aliacorruption, money laundering, tax evasion, and terrorist financing. Whilst the idea is simple, in practice the ‘Persons with Significant Control’ (PSC) legal and regulatory framework is rather more operationally complex.

For starters, it is not only necessary to review the existing legislative framework spread out across numerous pieces of primary and secondary legislation, it is also necessary to review a range of official and statutory guidance provided. In relation to the former, these include: (1)The Small Business, Enterprise and Employment Act 2015; (2) The Companies Act 2016 (Section 12A, Part 21A, and Part 24); (3) The Scottish Partnerships (Register of People with Significant Control) Regulations 2017; (4) The Information about People with Significant Control (Amendment) Regulations 2017; (5) The European Public Limited-Liability Company (Register of People with Significant Control) Regulations 2016; (6) The Limited Liability Partnerships (Register of People with Significant Control) Regulations 2016; and (7) The Register of People with Significant Control Regulations 2016.

In relation to the latter, these include: (1) Guidance for eligible Scottish partnerships on the meaning of ‘significant influence or control’; (2) Guidance on PSCs; (3) Guidance on the protection regime for suppressing PSC information in exceptional circumstances; (4) Statutory guidance for companies on the meaning of ‘significant influence or control’; (5) Statutory guidance for LLPs on the meaning of ‘significant influence or control’; and (6) Summary guidance on the PSC register for companies; Furthermore, those businesses affected now also need to be aware of the array of sanctions, such as fines and criminal offences, that can be imposed on firms and individuals that fail to comply with the range of legal duties now set out in the PSC framework. This makes fully understanding the PSC operational framework a top priority for covered firms.

From 6th April 2016, all companies and LLPs are required to keep a register of PSC and to file the information on their register with Companies House (from 26th June 2017, this requirement was extended to unregistered companies, certain listed companies, and also ESPs). In addition, from 30th June 2016, all companies and LLPs are also required to deliver to Companies House certain information regarding their PSC whenever there is a change in PSC, and when making an annual confirmation statement. The PSC Register (PSCR) requires personal details of a PSC to be entered, such as name; date of birth; nationality; residential address; service address; date of entry on the PSCR; and conditions which apply for the PSC. The PSCR is available to search to the public free of charge. Over time, as Companies House receives more information, the service will be able to provide a more complete picture about the beneficial owners behind UK companies, LLPs, SE, and ESPs. As noted by Companies House:

“In terms of greater transparency, this is a big step forward to help to further strengthen confidence in business and deliver real benefits to the UK economy as a whole.”

From a high-level perspective, firms are required to identify PSC; enter information on the PSCR; and update PSC information, as necessary. Some of the operational challenges stem from the interpretation of requirements under the PSC framework. For example, firms need to understand what ‘taking reasonable steps’ to find out if there are PSC over a company, LLP, SE, and ESP means, i.e. the ‘Reasonable Steps Test’. Firms also need to understand how to carry out the Reasonable Steps Test on both an objective and a subjective basis. It should be noted that failure to take reasonable steps under certain circumstances constitutes a criminal offence.

Firms need to understand how to categorise PSCs according to five pre-defined categories, with such categories and categorisation tests dependent on the type of entity under review, e.g. company, LLP, trust. Where, for example, a company is owned or controlled by a legal entity, firms need to understand when they are required by law to enter the legal entity’s details onto the PSC register, i.e. when the legal entity is both RELEVANT and REGISTRABLE. Firms also need to understand when they are required by law to serve notice on individuals and legal entities in order to confirm information. Furthermore, what is also challenging, is that firms also need be able to understand and interpret what “having the right to exercise, or actually exercising, significant influence or control over the activities of a trust or firm which is not a legal entity” means in practice.

From an operational perspective, firms also need to be able to understand, not only the use of relevant forms (e.g. PSC01 (Notice of Individual PSC); PSC04 (Notice of Change of PSC Details); PSC08 (Notice of PSC Statements); PSC09 (Notice of Update to PSC Statements)), but also official boilerplate wording that is required to be entered on the Companies House register (e.g. ‘No PSCs or Relevant Legal Entities (RLEs)'; 'Unidentified PSC'; (3) 'Unconfirmed Particulars'; 'Taking Reasonable Steps'; 'Notices'; 'Conditions'. For more complex operational groups of firms, and firms with multiple types of operating entities (e.g. chains of trusts, complex partnerships), the PSC operational requirements may require significant input from firms, in terms of internal ‘mapping’ of complex ownership structures, and identification of legal requirements in relation to all existing operational entities. For smaller and medium-sized firms, the priority should be getting to grips with the interpretation of specific terms and categories, and becoming more acquainted with the operational tests involving PSCs.