Record important control persons

Changes to the register of beneficial ownership of UK companies (the Register of Persons with Significant Control – the PSC Register) will impose new identity verification obligations on certain shareholders and other persons with significant control, with significant penalties for non-compliance.

These changes, introduced under the Economic Crime and Corporate Transparency Bill (“the Bill”), are part of the Government’s Economic Crime Plan 2: 2023-2026 which aims to “improve transparency in relation to UK businesses” by empowering Companies House. Verifying the identities of those in charge of establishing, managing and owning companies. The bill introduces important reforms to the House of Companies; This article focuses on the changes made to the PSC system by the current form of the Bill.

background

UK registered companies are required to identify and keep a record of the Persons with Significant Control (PSCs) over the company.

An individual is considered a public joint stock company in relation to a company if it is, on a large scale

  • To own, directly or indirectly, more than 25% of the company’s shares or voting rights
  • They have the right, directly or indirectly, to appoint or dismiss the majority of the members of the Board of Directors
  • the right to exercise, or to exercise, “significant influence or control” over the company; or
  • They are entitled to exercise “significant influence or control” or to exercise “significant influence or control” over the activities of a trust or partnership (which is not a legal person), whose trustees or members (as the case may be) satisfy any of the above conditions in relation to the company.

If the body corporate is a private joint stock company in relation to a UK company if it is an individual, it will be registrable on the PSC register of that company if the body corporate is either (a) a UK company itself subject to the PSC regime or listed on the London Stock Exchange or (b) a UK company Non-UK affiliates are treated as subject to similar disclosure requirements – these entities are referred to as Related Legal Entities (RLEs). Non-UK companies registered on the Register of Overseas Entities (ROE), or have voting shares permitted to trade on a regulated market in the UK, EU or specified market in the USA, Japan, Israel and Switzerland, will have RLEs.

If an individual has an interest (or control) in a UK company through an RLE, the individual will also not be registrable on the PSC register of the underlying UK company (as the individual would be identifiable from the RLE’s PSC register or equivalent disclosures). However, if an individual holds its interest or control through a non-UK entity and is not an RLE, the individual will be deemed to have a registrable indirect interest or control if the individual holds a majority interest in that non-UK entity.

Changes to the PSC log

As part of the changes made by the Bill, the requirement for companies to create and maintain their own PSC register has been removed – instead all relevant information relating to a company’s PSCs and RLEs will only be kept in the public register at Companies House. .

New identity verification requirements

The second significant change to private security companies under the bill is the introduction of new identity verification requirements. All new and existing registerable PSCs will need to verify their identities. All new and existing recordable RLEs will need to verify that one of their officers (a corporate director, member of an LLP, or equivalent) is an individual – this person is known as the ‘Registered Officer’. Recordable RLEs will also need to maintain a registered employee whose identity is verified. Similar identity verification requirements will also apply to all directors of companies in the UK.

Identity verification can be done directly with Companies House (through an online portal, by submitting a photo or scan of their face and identification document), or through an authorized company service provider. Online verification from Companies House will be carried out by linking the individual to an essential identity document, such as a passport or driving licence, although alternative methods will be available to individuals without photographic identity documents. There will be a transition period – potentially 6 months – for existing PSCs and RLEs to comply, although administrators will not be able to make filings to Companies House on behalf of their company until their identity has been verified.

When establishing a new company, if PSCs are not verified within 14 days of incorporation, they will commit a criminal offence. RLEs will have 28 days to verify the identity of one of their officers who is an individual.

These new rules will also apply to non-UK companies that are required to register their UK organization with Companies House because they have some degree of physical presence in the UK (such as a place of business or branch) through which they conduct business.

Identity verification is expected to be a one-time requirement. However, the bill includes the power to create regulations that provide for the circumstances in which someone ceases to be an individual whose identity is being verified. This is expected to be done only in cases where the registrant has reason to doubt the validity of the identity verification, such as suspicion of fraud.

Any person who does not comply with identity verification requirements, without reasonable excuse, will commit an offense and could face criminal proceedings and a fine. When a crime is committed by an RLE, every employee of the entity will commit a crime.

UK companies held in trust structures

Where it is a British company held in a fiduciary structure, the way the PSC rules operate can lead to difficulties in determining who should be treated as a private joint-stock company of the underlying company, or may result in individuals or entities having no effective interest in, or control over, the UK company. The principals that are registered as private joint stock companies in the PSC registry.

For example, where a British company is wholly owned by a non-UK company which is itself owned in a non-UK trust with a non-UK company trustee, the ultimate owners of the non-UK company trustee may be registered in the PSC registration even though there is no interest in the UK company or controlling her. In addition, any individual deemed to be exercising significant influence or control over the trust must be registered on the UK company’s PSC register. While in some cases it is clear that an individual has such influence or control – for example, where they have the power to appoint and remove trustees – this is not always easy to determine, and companies rely on trustees to provide them with assistance. Accurate information about whether there are any relevant authority holders.

What steps should companies take?

While there will be a gap between the Bill being passed into law and the provisions coming into force – to give businesses time to develop the IT systems needed for this new system – as well as a transition period for existing PSCs and RLEs to comply, there is clearly a risk that Some are not informed of the new rules in a timely manner (particularly when it comes to trusts), or do not appreciate the significant penalties they face for missing a deadline. It is not clear whether Companies House plans to send notice of the new requirements to all registered PJSCs and RLEs, or whether Companies House, as is the case with the ROE regime, will take a “light” approach to penalties when it enters rules for the first time. power.

However, companies should not wait for Companies House to take the lead, and should take steps now to ensure that their private security firms and stakeholder organizations are aware of the new requirements, so they can start preparing once the bill is passed.

If you have any questions about how the issues raised affect you, please contact us.

This article is part of a series on transparency issues, including articles covering:

  • The latest disclosure obligations in the UK
  • Useful ownership records and trusts that own UK lands
  • Log of external entities – missed deadlines and incorrect information
  • External Entity Record – Changes that affect trust structures and require additional information
  • Is public access to useful UK property records here to stay?

(Tags for translation) Law

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