On 6th April 2016, the Small Business, Enterprise and Employment Act 2015 came into effect. As part of this law, UK Companies and Limited Liability Partnerships (“LLP’s”) are required to maintain a People with Significant Control (PSC) register. Turner Little outlines the key considerations of PSC register compliance for UK Small Businesses.
What is a PSC register?
At the 2013 G8 summit, world leaders agreed to promote corporate transparency. This measure was implemented because complex corporate ownership structures can make it difficult to determine who owns and controls businesses. As a member of the G8, the UK government is abiding by this commitment by introducing PSC registers for UK Companies and LLPs.
A PSC register is designed to show who owns and controls a firm. All LLPs, even small businesses with a single director, are now required to implement and maintain a PSC register for their company. It is vital to understand the key considerations of complying with this law as a business owner failing to comply could be subject to criminal charges.
Persons of Significant Control
First, let’s look at who counts as a “person of significant control.” According to Small Business, this term applies to any person who “substantially owns or controls a company.” If someone falls into one of the following five categories, they count as a PSC and should be added to your firm’s PSC register:
- Own more than 25% of your business’ shares.
- Possess over 25% of your business’ voting rights.
- Have the power to remove the majority of your firm’s board of directors.
- Possess the right to exercise or actually exercise significant control or influence over your venture.
- Has the right to, or can actually exercise, significant control or influence over a trust or business which is not a legal entity, but satisfies any of the above mentioned conditions.
Who are your PSCs?
You need to identify PSCs at your firm and this will depend on its set-up. Let’s say your company has two shareholders who both possess 50% of its shares. As both shareholders surpass the 25% share threshold, they both count as PSCs and should both be added to your firm’s PSC register. Let’s assume that in this example, all shares carry one vote. You would also need to note in your PSC register that both shareholders possess over 25% of your business’ voting rights, as they satisfy this criteria as well.
But what if things are more complex. For example, your company has five shareholders who each possess 20% of shares? You would not need to add any of these shareholders to your PSC register, because none of them surpass the 25% shares threshold. If they do not meet any of the other conditions, your firm would not have any PSCs, but your PSC register must never be blank. Legally, it is acceptable for your business to have no PSCs but you must make a note of this on its PSC register.
How to set up your PSC register
So, if you fall under this criteria, how do you set up your PSC register? First, you are required by legislation to “take reasonable steps” to determine whether there are people with significant control over your firm. Second, if this applies to your business, you are required to contact the relevant PSCs and confirm whether they meet one or more of the criteria for inclusion on your company’s PSC register. If you cannot contact a particular PSC, you should contact others who may know the party in question to determine the answer to this question.
Assuming the PSC in question does comply with this criteria, confirm the relevant information needed to list them on your business’ PSC register. By inputting your PSC’s data, you can create your register. Once this is completed, you are required to confirm the information in your PSC register in your business’ next ‘Confirmation Statement,’ which is to replace Annual Returns as of July 2016.
Make sure you keep the information included in your firm’s PSC register up to date. Also, ensure you implement any necessary changes if someone ceases to meet PSC criteria or your firm receives a new PSC. With the introduction of PSC registers, your duties as the director of a limited company will expand, placing extra burdens on your valuable time. Utilise Turner Little’s miscellaneous corporate services to access support on PSC register maintenance and filing issues.
Turner Little
Turner Little was founded in 1998 and it has since become a well-established UK based professional Company Registration Agent, Registered Bank Intermediaries and Business Consultants, as well as Trust provider. You can receive our monthly newsletter by signing up using the form below.
