Shareholder privacy on borrowed time
On 6 April 2016, new rules come into force requiring companies (which includes limited liability partnerships) to keep a register of individuals and legal entities that have control over the company.
These individuals and legal entities will be known as People with Significant Control (PSC).
The new rules come into force pursuant to the Small Business, Enterprise and Employment Act 2015 which amends the Companies Act 2006. From 30 June 2016 onwards, companies will have to deliver this PSC information to the central public register at Companies House when making an annual Confirmation Statement. All companies who are not already subject to disclosure rules or who are not listed on the stock market, will be required to maintain such a register.
The new rules will affect 3.4 million companies and the Government indicates that the cost of this change will be approximately £25 per company per annum. Given that some companies or groups may wish to re-structure to accommodate these new rules, this seems to be a rather optimistic estimate.
So here are FIVE TIPS on complying with the new rules:
TIP ONE Compile and maintain a register of any individual, company or trust that:
– Directly or indirectly owns 25% or more of your company’s shares and/or 25% or more of your company’s voting rights; or
– Directly or indirectly has the right to appoint or remove a majority of the board of directors; or
– Has the right to exercise significant influence over your company; or
– Exercises or has the right to exercise significant influence or control over the activities of an individual, company or trust that meets one or more of these criteria.
TIP TWO Take reasonable steps to identify every such individual, company or trust and, if necessary, send them a notice requesting them to provide further information to assist your investigations or to confirm their interest. There is no prescribed form for this notice. It will be your company’s obligation to keep the register updated and file the information and any changes with Companies House by way of an annual Confirmation Statement. Failure to comply with the new rules can result in the directors of your company facing a fine or imprisonment.
TIP THREE If you do not have all the necessary information to complete the register, your register should reflect this and should never be left blank. Companies seeking to incorporate from 30 June 2016 onwards will be required to provide PSC information by way of an Initial Statement. The register is to then be maintained annually or when there is a change in the level of control of a shareholder.
TIP FOUR There will be two copies of the register – one at your company’s registered office and the other at Companies House. The register at your company’s registered office will need to contain the PSC’s name, month and year of birth, nationality and service address. This information will be accessible to the public upon request. If your company is a private limited company, you can opt for an exclusive copy of the register to be held at Companies House. The register will need to include the same information but with the addition of the day of birth of the PSC. The register at Companies House with also be open for public inspection. Like the current protection rules, if there is a serious risk of violence or intimidation, a PSC can apply to court to have details withheld from the public by Companies House.
TIP FIVE Individuals, companies and trusts also have a responsibility to inform a company that they are or may be a PSC of a company to ensure the register is kept up to date. Withholding this information is an offence. Similarly, if an individual, company or trust changes status to become a PSC they must notify the company within one month from the date of the change. An individual, company or trust receiving an information request from a company has a legal duty to respond.
No doubt the new rules will serve a purpose but, in our view, they are going to create a lot of tension within companies and, in some quarters at least, a lot of concern about personal privacy.
So much for lifting the burden of regulation on business!