Companies are likely familiar with the requirement since 6 April 2016 to create and maintain a register of persons with significant control (often called ‘beneficial owners’) (a “PSC Register”), but the beneficial ownership rules under the Register of Overseas Entities (“ROE”) may still be a foreign concept. This note will assist companies in understanding the differences between the two sets of rules, whilst revisiting the PSC regime to help ensure ongoing compliance.
The PSC Register applies to all unlisted companies, LLPs and Societas Europaeae in the UK, requiring them to compile a register of all persons with significant control over the company, whereas the beneficial ownership rules under the Economic Crime (Transparency and Enforcement) Act 2022 (“Act”) and the ROE seek to only capture information about beneficial owners of overseas entities that own certain UK land or property.
Below is a summary comparing the two regimes to demonstrate how they differ:
PSC Register
Register of Overseas Entities
Introduced under the Small Business, Enterprise and Employment Act 2015 and the Companies Act 2006
Introduced under the Economic Crime (Transparency and Enforcement Act) 2022
Applies to unlisted companies and LLPs in the UK
Applies to overseas entities (legal entity governed by law of a country or territory outside the UK) that own a qualifying estate in the UK
Need to record PSC information in company’s PSC register and declare PSC information to Companies House on incorporation, updating records at Companies House within 14 days of changing the PSC register
Need to declare beneficial owner information as part of registration process at Companies House and update information annually
A person is a PSC if they have more than 25% of the company’s shares or voting rights or exercise significant influence or control over the company in some other way
An individual, government/public authority or other legal entity is a beneficial owner if they have more than 25% of the overseas entity’s shares or voting rights or exercise significant influence or control over the company in some other way
If there are no beneficial owners to register at Companies House, a statement should be provided to such effect to ensure compliance with keeping register up to date
If details of beneficial owners not registered at Companies House and overseas entity is not provided with overseas entity ID, affects ability to sell, register leases of more than 7 years or obtain legal title to land
Failure to take reasonable steps to identify beneficial owners is an offence committed by the company and every officer in default, punishable by a fine or up to 2 years’ imprisonment
Failure to comply with updating duty is an offence committed by the overseas entity and every officer in default, punishable by a fine
Having looked at the core differences between the PSC Register and Register of Overseas Entities, we have set out below some common queries relating to the application of the PSC regime to serve as a reminder for ensuring compliance at Companies House and maintaining the company’s own PSC register. Further information on the Register of Overseas Entities is available in our guide to the Register and its impact on Real Estate transactions here.
Yes, a company must update the public register within 14 days after the day a relevant change has occurred in the company’s own PSC register. However, some individuals might have applied to protect their information from being published on the Companies House register. In this instance, this should be reflected in the company’s PSC register, as protection from disclosure applies from the date the application is made.
Statutory guidance sets out a non-exhaustive list of examples where a person may have significant influence or control, but, in the instance that the LLP does not have a PSC or cannot provide confirmed details of their PSC, a number of statements listed below must be entered on the PSC register and recorded at Companies House. The statements are as follow:
A trustee of a trust can be a PSC where the trust has the required shareholding or level of control in a company, either directly or indirectly. In addition to this, a beneficiary may become a PSC also if that beneficiary exercises significant influence or control over the trust. However, in the circumstance where a trustee is merely a nominee, it is only the beneficiary who is a registrable PSC.
An English limited partnership doesn’t have separate legal personality, so is not entered on a company’s PSC Register. Instead, the general partner is entered into the PSC Register if it is an individual or RLE.
A relevant legal entity (“RLE”) is the term used for a corporate entity (rather than an individual who is referred to as a PSC). Overseas companies do not have to keep PSC registers of their own, but have similar requirements for transparency according to their jurisdiction.
An overseas company can only be a RLE if it has listed shares on the UK, EEA, or other specified markets. If the overseas company is listed in one of the specified markets then it can be registered as an RLE and there is no need to look further up the chain of beneficial ownership. However, if the company is not listed then it cannot be entered as a RLE and it is necessary to look up the corporate chain to assess whether any entity or individual indirectly holds a “majority stake” in that overseas company. This doesn’t have to include holding a majority of the shares; controlling the company can be sufficient.
The “majority stake” concept for indirect holdings relies on legal entities which are defined in the Register of People with Significant Control Regulations 2016. Legal entities which include incorporated overseas entities, with voting shares admitted to trading on certain markets, such as US, Japan, Switzerland and Israel fall within the definition of a RLE. Unlisted companies incorporated overseas would not be RLEs.
Individuals can meet the PSC criteria by virtue of direct or indirect interests in the company concerned, and this can be identified by a statutory test which assesses whether an individual has indirect control in a UK company. Indirect control conditions are satisfied when an individual holds its rights through another legal entity which itself accords with one of the five control conditions (such as holding more than 25% of the company’s shares or voting rights). The individual must hold a majority stake in the legal entity which holds one of the five control conditions, such as holding a majority of the voting rights in that legal entity.
The next consideration would then be whether that individual is registrable in the UK company’s PSC register, which can be assessed using the a further test under the Companies Act 2006. An example would be where an individual holds rights indirectly through a legal entity which is itself a registrable RLE, in which case the individual with the indirect rights would not be entered on the company’s PSC register.
If a company cannot complete the register then it must include official wording set out in the PSC Regulations to reflect the progress of the company’s investigation into identifying a PSC. It is not possible to leave the register void of any information.
Regulations 10 to 13 set out the following:
The PSC regime imposes legal obligations, which, if not complied with, can result in a fine or criminal offence with up to 2 years’ imprisonment. Offences can arise as a result of failing to provide information about PSC or RLE interests, providing false information (for which directors will also be liable) and failure to take reasonable steps to identify a PSC or RLE of a company.
If you would like further assistance in ensuring compliance with the PSC regime or navigating the requirements of the Register of Overseas Entities, please contact our Corporate team.