Persons with Significant Control
Changes to the law applicable to Ltds, LLPs and SEs in the UK with effect from 6 April 2016
On 6 April 2016 significant company law changes came into force introducing requirements for a Register of “Persons with Significant Control” to be maintained and filed at Companies House. The aim of this new legislation is to increase transparency regarding the beneficial ownership of corporate entities operating in the United Kingdom.
Which companies are affected?
All private limited companies (Ltds), limited liability partnerships (LLPs) and Societas Europaeae (SEs) which are registered in the United Kingdom are obliged to maintain such a Register with effect from 6 April 2016.
The rules apply even where the company in question is a wholly owned subsidiary of a foreign company. Where a group structure contains more than one UK registered Ltd, LLP or SE, each must register and maintain its own register.
What constitutes “significant control”?
The rules are slightly different depending on the type of company involved. There are five distinct circumstances in which a person may be deemed to have significant control:
- A person who holds (directly or indirectly) more than 25% of the nominal value of the company’s shares.
- A person who holds (directly or indirectly) more than 25% of the company’s voting rights at shareholder meetings.
- A person who holds (directly or indirectly) the right to appoint or remove a majority of the company’s board of directors.
- A person who has the right to exercise or is exercising significant influence or control over the company.
- A person who has the right to exercise or is exercising significant influence or control over a trust or partnership where the trustees or partners meet any of the conditions above.
The UK Government has issued detailed guidance as to what constitutes “significant influence or control” in these circumstances.
Identifying direct control will be relatively simple. However determining precisely who is exercises indirect significant control can be much more complicated, especially in a group structure involving foreign companies and ultimate individual beneficiaries. In certain cases the ultimate beneficiary of the parent company of the group will need to be recorded in a subsidiary’s Register much lower down the chain.
What information must be included in the Register?
Once a company has identified a person with significant control it must record their details in the Register. The Register must include amongst other things the person’s name, service address, residential address, nationality, date of birth and the nature of the control they hold. The information contained in the Register must also be filed at Companies House and an annual confirmation of correctness given thereafter.
If this information is not readily available to the officers of the company it should be requested in writing using the pro-forma notice issued by the UK Government for this purpose.
The Register must be open to public inspection and the information filed at Companies House will also be publicly available. Personal information such as the residential address and date of birth will be protected in the same way as directors’ information is currently protected. There are also certain provisions to allow for an application to keep other information out of the public domain if there is a serious risk of violence or intimidation as a result of this information being made public.
What are the penalties for not complying?
A failure to put in place and to maintain a Register of Persons with Significant Control is a criminal offence. This offence is committed by both the company and its officers and anyone refusing to provide the information necessary to complete the Register. The maximum penalty is two years’ imprisonment and/ or a fine.
If you are an officer of a limited company, LLP or SE which is registered in the United Kingdom you must ensure that steps are taken without delay to implement the necessary Register and to obtain the necessary information in order to be able to complete it.
If any of these entities are part of a wider group structure you should obtain legal advice without delay in order to determine precisely what information (and in particular which indirect significant interests) need to be included in the Register.
Any questions? Please contact: Lucy Holden
Practice Group: Litigation, Arbitration & ADR