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PSCs it’s all change from June 2017 so be aware

Amendments to the rules regarding PSCs came into force in June 2017. John Korchak explains what these mean for companies:

From April 2016, most UK limited companies have been required to create and maintain a register of people with significant control (or PSCs). This includes details of who ultimately controls or exercises significant influence upon the company. From 30 June 2016, every company also needed to submit its PSC details as part of its confirmation statement, which replaced the annual return. So the confirmation statement was the means by which new PSCs, changes to existing PSCs, someone ceasing to be a PSC and associated statements become part of the public record held at Companies House.

Why a change?
Just as companies and their advisers have started to get to grips with the PSC requirements, things have changed again.
As part of the implementation of the EU Fourth Money Laundering Directive (‘4MLD’), which took effect on 26 June 2017, the PSC regime has received an update. With the overall aim of further targeting money laundering and terrorist financing, the June implementation took place irrespective of Brexit – at least as long as the UK retains EU membership, it continues to apply EU legislation.

PSC reporting frequency
From 26 June 2017, PSC information no longer needs to be updated annually on the confirmation statement. Instead, to meet the 4MLD requirement for the central register to be ‘adequate, accurate and current’, companies must now report PSC changes to Companies House as and when they happen. Alongside reporting changes promptly to Companies House, companies are still required to maintain their Register of People with Significant Control.
Common changes that companies now need to report directly to Companies House, as well as update in the PSC register, include:
• The emergence of a new PSC, relevant legal entity (RLE) or other registrable person – for example, if someone buys shares in the company and their ownership exceeds 25% of the company’s share capital for the first time.
• Changes in specified details of a PSC, RLE or other registrable person – for example, a PSC changes their residential address or an RLE company changes its name.
• The nature of an existing PSC’s control over the company changes – for example, they move between different shareholding ‘tiers’ by buying or selling shares.
• Someone ceasing to be a PSC or RLE – for example, they sell shares so that they now hold 25% or less of the company’s shares or voting rights.
Reporting changes promptly to Companies House in this way brings the requirements for PSCs more in line with the existing rules for company officers – where changes to a director’s or secretary’s details have long needed to be filed with Companies House on an event-driven basis rather than included in the annual confirmation statement.
Companies will also need to report various specified statements as they become or cease to be true. These are mostly relevant while the company is identifying and obtaining details of PSCs, or where there is good reason to believe there are no persons with significant control over the company.

Submit changes online
It’s generally quickest and easiest to submit all changes online rather than using often complex paper forms. Using specialist company secretarial software packages like Inform Direct, you just need to record changes that have occurred. The correct filings are automatically identified, so you don’t need to know which of the nine forms is correct to use in each circumstance. A fully compliant electronic submission is prepared and immediately submitted to Companies House, saving you time and helping you remain fully compliant with a minimum of fuss.
After a relevant change occurs, companies and LLPs have 14 days to update their PSC register and then a further 14 days to submit details of the change to Companies House. Therefore, there’s a maximum filing period of 28 days from the date of the event in which to file. To avoid any threat of penalties, this means companies must always be active in reviewing, updating and chasing (potential) PSCs for information where necessary – and then promptly making required submissions to Companies House.

Confirmation statement changes
Companies will still have to file a confirmation statement each year. However, confirmation statements filed now cannot be used to update PSCs, but instead only to record any updates to the company’s:
• Statement of capital.
• Shareholders.
• SIC codes.
• Whether the company is trading on a market and its DTR5 status.
While changes to PSCs no longer feature, the confirmation statement should still be used to record where a company is exempt from the requirement to deliver information on PSCs.

The PSC regime and other entities
The scope of the PSC regime has been extended to cover all active Scottish Limited Partnerships (SLPs) and also General Scottish Partnerships (SPs) where all the partners are corporate bodies. These entities will now need to report PSC information and changes with Companies House within 14 days.
Other types of entity are also newly subject to the regime. For example, unregistered companies – including those formed under Royal Charter or by private Act of Parliament – will now need to report on any PSCs they have.
The exemptions that currently apply to DTR5 companies also changed from 26 June. Unless a company is traded on an EEA or Schedule 1 specified market, it is no longer exempt and instead needs to hold information about its PSCs and submit details of any changes to Companies House. The companies affected are primarily those with shares listed in AIM or the NEX Exchange Growth Market.
Entities newly affected need to record PSC information in much the same way as UK companies and LLPs already subject to the regime, but potentially with amended ‘nature of control’ conditions. Many of the affected organisations, for example, do not have shareholders so the reasons applied to them will be based on other means of control than a traditional shareholding in a company.
The government has confirmed that overseas companies with merely a branch or place of business in the UK will remain out of scope, although they may be subject to a similar level of disclosure in their company’s home country.

Protection of PSC information
Certain PSC information that forms part of the public record, notably the day of a PSC’s date of birth and usual residential address, is accessible only by specified public authorities. Going forward, access will be extended to financial intelligence units, competent authorities and other entities that have an obligation to carry out customer due diligence.
All PSC information held on the public record is now also available to law enforcement agencies, with no exceptions.

• John Korchak, Inform Direct. Inform Direct’s award-winning company secretarial software fully supports the new PSC regulations. See www.informdirect.co.uk

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