The PSC Register – charities and social enterprises

Since 6 April 2016, the Small Business, Enterprise and Employment Act 2015 requires UK companies to create and maintain a new statutory register (known as a PSC Register).  This requirement also applies to charitable companies and community interest companies (CICs).

The PSC Register

This PSC Register will contain details of the individuals and relevant legal entities that have “significant control” over the company.

A copy of a company’s PSC Register will need to be filed with Companies House from 30 June 2016 when the company's annual confirmation statement is due (previously known as the annual return).

Why is the Register being introduced?

The Government hopes that by making both the legal and beneficial ownership of a company publically available, this will help combat tax evasion, money laundering and terrorist financing.

What should be included in the PSC Register?

A company's PSC Register must contain details of all individuals (PSCs) and relevant legal entities (RLEs) which have “significant control” over the company.

Who is deemed to have "significant control"?

An individual will be a PSC if he or she satisfies any one or more of the following conditions:

1. He or she holds more than 25% of the company’s shares (directly or indirectly) – this will not apply to charitable companies;
2. He or she holds more than 25% of the company’s voting rights (directly or indirectly);
3. He or she has the right to appoint or remove a majority of the board of directors of the company;
4. He or she otherwise has the right to exercise, or actually exercises, significant influence or control over the company; and/or
5. He or she has as significant influence or control over a trust or firm which has significant control over the company.

Guidance from the Department for Business, Innovation and Skills (BIS) on the meaning of "significant control or influence" can be found here.

What is a RLE?

An entity will be registrable as a RLE if it satisfies all of the following conditions:

1. It must be a legal entity for the purposes of the PSC regime;
2. It would meet one or more of the specified conditions if it was an individual (see above); and
3. It must be subject to its own disclosure requirements under the PSC regime.

This will be relevant for charitable companies which own a subsidiary trading company, for example.  The parent charity will be registrable as the subsidiary's RLE.

This may also be relevant where a UK business has set up a charitable company to carry on its corporate social responsibility programme and has retained certain constitutional rights (e.g. to appoint a majority of the charity's directors).

What do I need to do?

You will need to:

• identify any PSCs or RLEs for your company and the nature of their control or influence; and
• enter the relevant information onto the company's PSC register, including which condition they satisfy to be a PSC, and confirm the details are correct. If you do not already have the required information, you may need to serve a notice on the relevant PSC or RLE requesting this;
• keep the register up to date. From 30 June 2016 companies will be required submit a Confirmation Statement each year which will replace the annual return; and
• charitable companies incorporated from 30 June 2016 will also be required to provide an initial statement of beneficial ownership on incorporation.

How might this affect me?

In most cases charities structured as companies will simply need to make a note in the PSC register that they do not have any PSCs or RLEs.  However, in some circumstances an entry in the PSC register will be necessary.  Examples would include the following scenarios:

• Where a third party has rights to appoint or remove a majority of the board, or controls a charitable company’s decisions, the third party will be the charity's PSC or RLE.
• A corporate foundation will have a RLE where the corporate supporter is the foundation’s only member or has a right to control the board membership.
• Charities or CICs may be RLEs where they collaborate via a joint venture company.
• Where a charitable company has fewer than four members (with equal voting rights), the members will all be PSCs. This will also affect charitable companies with less than four trustees where members and trustees are the same people.
• Individual trustees of an unincorporated association or charitable trusts which have control of its subsidiary trading company may need to be named in the subsidiary's PSC register. (This is likely to be the case even if they hold shares in the subsidiary company via a nominee).

Scenario 1

A charitable company has a wholly owned subsidiary trading company.

The trading subsidiary will need to list the charitable company as a RLE on its PSC Register recording:

1. its name and registered office address;
2. its legal form and the law by which it is governed;
3. the date it became a registrable RLE in relation to the trading subsidiary (e.g. 6 April 2016); and
4. the nature of its "significant control or influence" over the trading subsidiary.

Scenario 2

A company with three directors appointed by a separate charitable trust.  The directors are also its only members and each have 33.3% of the voting rights.

• As all three members of the company hold more than 25% of the voting rights, each one is a PSC.
• Similarly, each of the trustees of the charitable trust is a PSC under condition 5 because the charitable trust appoints the directors of the company.

Accordingly, all three members and each of the trustees of the charitable trust will need to be listed on the PSC Register recording:

1. Their name, date of birth, nationality, country of residence, service address and residential address;
2. the date the they became a PSC in relation to the company (e.g. 6 April 2016);
3. the nature of their "significant control or influence" over the trading subsidiary; and
4. any restrictions on disclosing the PSC's information that are in place.

Scenario 3

A charitable company with five charity trustees.  Any new trustees are appointed by the serving trustees.  The trustees are also its only members each having 20% of the voting rights.

As none of the members hold more than 25% of the voting rights the second condition isn't satisfied by any member.

Provided that the trustees have considered the whether there are any other individuals may have "significant control or influence" over the company and have not identified any person who is a PSC, or RLE the charity's PSC register should state:

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

How can we help?

We advise companies on all aspects of PSC Registers. We offer fixed price options for maintaining your register; giving you peace of mind and helping you avoid unnecessary fines.

For more information, help or advice regarding the new legislation in this area please contact Annik Young on 0191 211 7912 or via [email protected].