The United Kingdom is at the forefront of international efforts to curb tax evasion and financial crime, and increase corporate transparency. This blog post summarises one of the UK Government’s key initiatives in this area: a new register of beneficial owners of UK companies.
HM Revenue and Customs explained in a brief published on 16 November 2015, that the UK will require companies to report beneficial ownership information to a central register. This register will be publicly accessible and is expected to become operational in June 2016. Financial institutions and designated non-financial businesses and professions undertaking due diligence will be able to access the information held on this register. The UK will also hold in a central register the beneficial ownership information of trusts that generate tax consequences in the UK.
The framework for the ‘persons with significant control’ (PSC) register is contained in the Small Business, Enterprise and Employment Act 2015, although the finer details of the new rules will be enshrined in secondary legislation and regulations. The first set of proposed regulations was published in June 2015 and subjected to a month-long public consultation.
The new rules will apply to all UK companies, except those listed on a regulated exchange in the UK or an EEA member state.
Persons With Significant Control
The regulations define a ‘person with significant control’ as a person that meets one or more of the following conditions for a single company:
- Directly or indirectly owns more than 25% of the shares in the company;
- Directly or indirectly holds more than 25% of the voting rights in the company;
- Directly or indirectly has the power to appoint or remove the majority of the board of directors of the company;
- Otherwise has the right to exercise or actually exercises significant influence or control over the company;
- Has the right to exercise or actually exercises significant influence or control over a trust or firm that is not a legal entity.
The details of PSCs that must be recorded include their name, residential address (which will not be publicly available), a service address, date of birth, and information about how they have significant control.
To ease administrative requirements, companies owned by other legal entities which are also required to maintain a PSC register are not required to look through their ownership chain until an individual is identified. Instead, the company concerned may enter details of that legal entity into its PSC register as a 'registrable legal entity'.
To ensure compliance, companies are able to freeze the interest of any individual or entity in that company if they do not respond to a notice to provide details to be entered onto the company’s PSC register within two months. The company may then serve a ‘restrictions notice’, which will freeze the person or entity’s interest in the company until the required information is obtained.
Criminal sanctions may also apply in cases of non-compliance with the new requirements.
Companies must hold their own PSC register from April 2016. From June 2016 onwards they will need to send the information to Companies House with their confirmation statement (that replaces the annual return) or as part of the incorporation package (for companies incorporating after 6 April 2016). Companies House will maintain the information from companies in a central public register.