As of 6 April 2016 small businesses could face legal action if failing to compile a PSC (People with Significant Control) register.
The register - required by the Small Business, Enterprise and Employment Act 2015 - applies from 6 April 2016 and affects directors in virtually all small companies - including those with just one director - and Limited Liability Partnerships (LLPs). Companies listed on the London Stock Exchange or AIM, along with others operating in markets with an existing obligation to disclose their major shareholders, are excluded from the legislation.
This new requirement is designed to ensure greater transparency about the people who own and run companies. The Government hopes that this, and other transparency elements of the Act, will address issues such as tax evasion, money laundering and terrorist financing.
Small business website, smallbusiness.co.uk, reports that PSC registers are aimed at demystifying “complex corporate ownership structures, often with long chains of ownership” that make it “hard to tell who owns and controls many companies”. Ultimately, it is about identifying who owns or controls a company in the UK and how they use that control.
Who is a person with significant control (PSC)?
Within a company, a PSC can be defined in a number of ways. For example, someone who owns more than 25 per cent of a company’s shares or holds the equivalent voting rights. Equally a PSC could have the authority over the appointment or removal of board members.
Further explanation is outlined in the Government’s Statutory Guidance on SIOC for Companies, which provides certain principles and examples relating to how a person within a company can be deemed to have significant influence or control (SIOC) along with the right to exercise it. That means a person could have the right to adopt or change a business plan or the nature of the business and wields the power to exercise that right: for example, a business founder whose shareholding is small but whom the business consults and follows that person’s advice on most decisions.
What to do now about a PSC?
Companies affected by the legislation should:
- Take reasonable steps to identify people with significant control over the company
- Contact those people and establish whether they meet the criteria to be included on a PSC register
- Collate the information ready to include in the company’s Confirmation Statement - replacing the current Annual Return from July
- Maintain an up-to-date PSC register, adding and removing people where necessary