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5: People with Significant Control – The PSC Regime and Charities

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5: People with Significant Control – The PSC Regime and Charities
Leave your thoughts Nicola Evans

By Nicola Evans

The “people with significant control” (PSC) regime came into effect on 6 April 2016. It is a new transparency regime aimed at creating a public register of those who own or control UK companies and LLPs. It imposes new duties on UK companies and LLPs, as well as anyone who is interpreted to have “significant influence or control” over them, with criminal offences for failure to comply.

From 30 June 2016, there will be a new requirement to update the information at Companies House. For new companies and LLPs this will done via a new PSC statement on incorporation; existing companies/LLPs will complete a confirmation statement in place of the annual return.

There are some exemptions in the legislation but these do not extend to charities, so charities need to identify what they are required to do to comply with the regime. Essentially, if there is a UK company or LLP within your structure, or even potentially within your operations, you may have duties under the new regime.

UK companies and LLPs now need to create and maintain their own PSC register. Anyone who has to be entered in a PSC register also has a duty to notify the company/LLP of the fact, as well as of any change to their registered details.

Our corporate briefing on the PSC regime sets out the main points on the regime, including the 5 conditions any one of which can make someone a PSC.

Guidance available

The regime is complex and there is a raft of guidance available, much of which is long and detailed. The guidance can be found here. At present the following guidance is available:

Further guidance is expected in due course, e.g. on the filing requirements at Companies House. It is worth checking back at the link above, therefore, to see what new or updated guidance may be available.

Briefings for charities

Although, as can be seen above, there is a mass of guidance available on the regime, very little of it refers to the application of the regime to charities. Given the different legal forms charities can take, the regime does not necessarily apply very easily to charity structures.

With that in mind, we have produced some briefings specifically for charities, which include some worked examples aimed at giving a feel for how the regime will apply. The briefings are:

These briefings can only give an idea of the regime. As noted in the briefings, how the regime will apply in any particular case will depend upon the facts of that case. This is in part because the regime is drawn very widely, making it necessary to look beyond the basic ownership structure of the company to check for other powers or relationships which cause someone to fall within the “significant influence or control” provisions.

Immediate steps

As the requirement to keep a PSC register is now law, the first step for companies and LLPs, including charitable companies and the trading subsidiary companies of charities, is to create a PSC register (which should be kept with the other company books) and then to start taking “reasonable steps” to identify their PSCs (if any).

The PSC Guidance for companies, LLPs and SEs (Societates Europaeae) contains, at Annex 2, official wording for entering in the PSC register. Where the company has not yet completed the reasonable steps to identify its PSCs and obtain their information, the official wording to enter in the register is:

“The company has not yet completed taking reasonable steps to find out if there is anyone who is a registrable person or a registrable relevant legal entity in relation to the company.”

If the company is sure it has no PSCs, the official wording is:

“The company knows or has reasonable cause to believe that there is no registrable person or registrable relevant legal entity in relation to the company.”

There is equivalent wording for LLPs in Annex 4 of the guidance.

Charities with a UK company or LLP within their operations or structure should consider now whether they or their charity trustees may be registrable in a PSC register under the regime.

Next steps

Once a PSC register is in place, companies (and LLPs) will need to start the process of identifying their PSCs and obtaining and confirming the relevant information for the register. The process involves sending out notices to those thought to be PSCs, or those thought to have relevant information. Sample notices are in the PSC Guidance for companies, LLPs and SEs (Societates Europaeae). The PSC register will need to be updated, using the relevant official wording, at each stage of the process.

Charities and charity trustees who are PSCs will need to consider processes for complying with the ongoing duty to update companies/LLPs of changes to their registered details in the PSC register, e.g. adding an action point on changes of trustees to notify the relevant company/LLP.

It should also be noted that almost anyone may be served with a notice under the regime to provide information. It is an offence to fail to comply with such a notice, without a valid reason, within one month of receipt, so it is important to be ready to deal with any notice received.

As noted in the Charity FAQs briefing, the PSC register must be available for inspection free of charge, although companies can charge £12 for a copy of the register. Companies need to have processes in place for dealing with requests to inspect the register – requests must be responded to within 5 working days.

Act now to comply

The transparency aims of the PSC regime may be well-intentioned, and following the recent Panama leaks it seems that other jurisdictions will proceed to implement similar regimes. For charities, it is unfortunate that the regime adds another layer of administration and bureaucracy for limited if any gain – charities and their trading companies are already subject to various transparency requirements in their dealings and it is not clear what further transparency the PSC regime will achieve for them.

However, the regime is not to be ignored. There are criminal penalties throughout the regime for failure to comply. These are less likely to be enforced in these early months leading up to 30 June when the information needs to start being published at Companies House, but we can expect that to change once the regime has bedded in. Charities and companies should take steps now to get to grips with the regime and start putting appropriate processes in place, so that they can be confident of being able to comply.

21 April 2016

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