Jordans Trust Company Limited

Jordans Trust Company Limited UK companies and the new PSC Register

Jordans Trust Company Limited A Guide: UK Companies and the new PSC Register

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This is a summary of the new public register of beneficial owners with “significant control” of a UK company, which will have to be kept from 6th April 2016. This register, which must be kept by all UK private companies and UK LLPs (among other companies) is known as the PSC register (an abbreviation for “People with Significant Control”).

Who is a PSC?

Condition 3

There are 5 separate conditions, any one of which will result in an individual being a PSC, and therefore registrable on the PSC register:

Condition 4

Condition 1

Direct or indirect ownership of more than 25% of the company’s issued share capital. Indirect ownership can be traced through any number of intermediate companies placed between the UK company and the PSC provided each intermediate entity (other than the one directly owned by the PSC) owns a majority stake in the subsidiary, and the PSC also owns a majority stake in the intermediate company he directly owns.

Condition 2

Direct or indirect ownership of more than 25% of the voting rights in the UK Company (in shareholders general meeting or equivalent forum). Indirect ownership can be traced through any number of intermediate companies placed between the UK company and the PSC provided each intermediate entity (other than the one directly owned by the PSC) owns a majority stake in the subsidiary, and the PSC also owns a majority stake in the intermediate company he directly owns.

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Direct or indirectly held right to appoint or remove a majority of the board of directors

Being an individual who has the right to exercise, or actually exercises significant influence or control over the company

Condition 5

Where the trustees of a trust, or the partners of a firm without legal personality are the PSCs of a UK company, any individual who exercises significant influence or control over the trustees or partners. The statutory guidance that must be provided by the Secretary of State on the meaning of “significant influence and control”, as that concept is used in conditions 4 and 5 of PSC status, is now in or close to final draft stage. This document will be essential reading for advisors and directors in order to comply with the new rules.


Comment The PSC register is available for inspection or copying by anyone on request provided that the requesting party identifies himself to the UK Company, and declares his purpose for requesting the inspection or copy. The residential address of the PSC is suppressed from copying or inspection. Various particulars of the PSC must be entered on the PSC register, including name, nationality and date of birth. All particulars of the PSC must be “confirmed” before the PSCs particulars are entered on the PSC register. The UK Company receiving a request for an inspection or copy of the PSC register has 5 working days either to provide the information requested, or seek a court order to authorise refusal of the request on the grounds that the request is for an “improper purpose”. This has not yet been defined in general or statutory guidance and is unlikely to be defined, but is possibly intended to cover money laundering purposes. Therefore the general expectation of the legislation is that UK companies must comply with requests provided the requesting party has gone through the proper process.

If a UK company applies for a court order to refuse the request, and the court denies the UK Company’s application, the UK Company must supply the PSC information immediately (but see the outline solutions we propose further on). UK companies have legal duties to investigate who their PSCs are, and give notice to them requiring the particulars of the PSC (including name and nationality) to be provided to the company. UK companies and PSCs are liable to criminal penalties for non-compliance with the respective duties to investigate and to supply information. However, UK companies administered by Jordans should not experience this problem.

Disengaging “significant influence and control” Beneficial owners of UK companies who wish to avoid being registered in the PSC register will have to ensure they do not exercise or have the right to exercise significant influence and control over a UK company.

Trusts

There are 5 separate conditions, any one of which will result in an individual being a PSC, and therefore registrable on the PSC Register.

Condition 5 of PSC status tacitly acknowledges that discretionary trustees are normally PSCs. It then remains to ensure that settlors and beneficiaries do not exercise “significant influence and control” over the day to day running of the trust. This can be achieved through appropriate trustee governance. Parity of reasoning suggests that foundations will also be capable of protecting their beneficiaries from disclosure on the PSC register. Such structuring will need to consider the forthcoming statutory guidance on the meaning of significant influence and control.

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Fragmentation of share ownership

If there are 4 beneficial shareholders each owning 25% of the UK company’s share capital, no-one is a PSC (provided none of the 4 individuals or any other individual meets Condition 4 of PSC status (i.e. has the right to exercise or actually exercises significant influence or control of the UK company)). This solution requires consideration of ‘joint arrangements’ which is an arrangement between the holders of shares or rights that they will exercise all or substantially all the rights conferred by their shares or rights in a predetermined way.

Split share capital arrangements

Splitting a UK company’s share capital into voting and non-voting shares, giving the non-voting shareholders the substantial economic rights (e.g. to dividend, or liquidation proceeds) whilst at the same time ensuring that their economic rights cannot be altered by the voting shareholders will, in appropriate circumstances, disengage the non voting shareholders from “significant influence and control.”

The importance of the statutory guidance

The draft statutory guidance is now before Parliament for approval. It is very important for advisors and company officers to read this guidance before making judgements about the entries the company makes in its PSC register.

The Register of People with Significant Control Regulations

This draft legislation has also been placed before Parliament for approval. It provides detail to the statutory provisions contained in Schedule 3 of SBEEA 2015, including the making of applications for protection from disclosure on the PSC register, and the narrative information to be entered on the PSC register.

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Limited Liability Partnerships (Register of People with Significant Control) Regulations 2016 This draft legislation has now also been laid before Parliament, and brings LLPs within the scope of SBEEA’s transparency rules.

Contacts For further guidance, please call +44 (0)117 918 1407 to speak to a member of our Corporate and Trust Planning team, or directly email any of the consultants named below: Jason Reader Associate Director Corporate and Trust Planning Unit [email protected] Lee Moore Manager Corporate and Trust Planning Unit [email protected] Stefano Iacono Corporate Consultant Corporate and Trust Planning Unit [email protected]

Contact us For more information on Jordans Trust Company services please contact us: T: +44(0) 117 923 0600 E: [email protected] Or visit www.jordanstrustcompany.com www.jordanstrustcompany.com Or follow us on Twitter @JordansTrustCom