Transparency of Company Ownership

Since 6th April 2016, UK companies and LLPs have been required to keep a register of persons with significant control over the entity, who may be the same as existing shareholders, or may be different. Companies were exempt from the requirement if they were subject to Chapter 5 of the FCA’s Disclosure Guidance and Transparency Rules (DTR 5). DTR 5 applies to UK companies with shares traded on a regulated market (such as the main market of the London Stock Exchange), as well as to companies with shares traded on a prescribed market like AIM. However, from 26th June 2017, the scope of the regime has been changed, so that it now applies to some additional companies, including companies listed on prescribed markets such as AIM and NEX

What does this mean for AIM companies in respect of an individual PSC: name, service address, country or state of usual residence, nationality, date of birth and usual residential address.in respect of an RLE: the entity’s corporate name, registered office, legal form and law by which it is governed, register of companies in which it is entered and registration number (if applicable).in all cases: details of the date on which a person became a registrable person or RLE and the nature of his or its control.

Who is a PSC?

they hold, directly or indirectly, more than 25% of the nominal value of the company’s issued shares;they hold, directly or indirectly, more than 25% of the voting rights in the company;

they hold the right, directly or indirectly, to appoint or remove a majority of the board of directors of the company;

they have the right to exercise, or actually exercises, significant influence or control over the company;

or they exercise or have the right to exercise significant influence or control over a trust or firm, which itself meets any of the above conditions.

Company A:

Person 1 and Person 2 are both PSCs because they each hold 50% of the shares in Company A. Each of those shares comes with 1 vote so Person 1 and Person 2 also each hold 50% of the voting rights in Company A. Company A must enter Person 1 and Person 2 as PSCs, meeting conditions (1) and (2) on its PSC register.

Company Z:

Assuming that there are no joint arrangements (see below), and none of the shareholders meet any of the other conditions, Company Z will have no PSCs because none of its shareholders own enough shares. Company Z must enter the fact that it has no PSCs on its PSC register.

The government has spread the net deliberately wide, and there are further rules on what constitutes indirect holdings, which broadly arise where a person holds a majority stake in a legal entity which holds shares or rights in relation to the company, or through a chain of companies the last of which holds shares or rights in relation to the company. Nominee arrangements and arrangements under which individuals jointly agree to exercise their rights in a certain way are also captured. So, for example, if shares or rights in the company are held by a nominee, they are treated as if they are held by the person for whom the nominee is acting.

Even if a person does not satisfy any of conditions 1 – 3 they may be a PSC by virtue of having “significant influence or control” which is relevant for conditions 4 and 5. Government guidance has been published on the meaning of this term, which essentially revolves around whether a person can direct the company’s activities or ensure that the company generally adopts the activities which they desire

What if the company is owned by a legal entity rather than an individual?

Company A must enter Company B on its PSC Register because Company B owns 100% of the shares in Company A and Company B is a UK company that keeps a PSC Register. Company A is not required to look further at its chain of ownership for any indirect interests held via Company B.Company B must enter Company C on its PSC Register because Company C owns 100% of the shares in Company B and is a UK company with its own PSC Register. Person 1 also does not go on Company B’s PSC register even though he or she holds an interest in Company B indirectly.

Company C must enter Person 1 on its PSC register.Although B owns 100% of the shares in A, A cannot put B on its PSC register as B is an overseas company and therefore not an RLE. Instead A must look at the ownership and control of B.C has a majority stake in B (holding 100% of the voting rights), but it is also not an RLE and cannot be entered on A’s PSC register.

A must therefore look at the ownership and control of C. Person 2 has a majority stake through holding more than 50% of the voting rights in C (which in turn has a majority stake in B). This means Person 2 is a PSC in relation to A and must be entered on its PSC register.

What action must the company take

Take reasonable steps to identify PSCs and RLEs

Although disclosure of major shareholders is required under DTR5, the PSC regime is a very different beast. Interests in the company held by individuals, legal entities and trusts or firms, should be considered, and also whether there is evidence of any joint arrangements or of rights held through a variety of means that might ultimately be controlled by the same person.

If a company does not have the necessary information in relation to its PSCs it will have to send notices to those that it suspects may be, or know the identity of, its PSCs.

If someone refuses to provide the information the company may have to consider imposing restrictions on any shares or rights they hold in the company. Note that a person who believes they may be a PSC is also under a legal obligation to voluntarily provide information to the company.

Confirm information. A PSC’s required particulars must be confirmed with the PSC before the information can be entered on the Register.

Record the required particulars. As well as the required particulars, the company must give details of the date on which a person became a registrable person or RLE and the nature of his or its control. Prescribed wording should be used for this.

File the information at Companies House.

Make the register available to the public on request, apart from residential addresses, which must be kept confidential.