The purpose of these requirements is to help increase transparency over who controls UK LLPs and companies.
From 30 June 2016 the PSC information will become publically available as it will form part of the annual confirmation statement (previously known as the annual return) which is submitted to Companies House. LLPs and their subsidiaries need to take steps now to identify their PSCs.
A LLP and its subsidiaries will need to:
The PSC register must never be empty. Prescribed statutory wording must be used to reflect the status of obtaining information about every PSC. A LLP which has concluded that it has no PSCs will still be required to maintain a PSC register but will include a statement to that effect in the register.
Essentially, a PSC is every individual, every registrable 'relevant legal entity' (RLE) (broadly being any UK company incorporated under the Companies Act, or a UK LLP, or an overseas company with shares listed on a recognised stock exchange), every governmental body, corporation sole that directly or indirectly satisfies one or more of the five conditions below in relation to the LLP or company.
Condition 1: The person has rights over more than 25% of the surplus assets on a winding up of the LLP or owns more than 25% of a company's issued shares
Condition 2: The person holds more than 25% of the voting rights at a members' meeting (whether generally or on particular issues)
Condition 3: The person is able to appoint or remove a majority of those members involved in the management of an LLP or, a majority of the board of directors of a company and every such person not satisfying one or more of conditions 1 - 3, who nonetheless:
Condition 4: has the right to exercise or actually exercises significant influence or control over the LLP or company (see below) or
Condition 5: has the right to exercise or actually exercises significant influence or control over a trust or a firm that is not a legal entity, which would satisfy any of conditions 1 - 4 if it were an individual.
There is a complex set of rules which apply to identifying PSCs. These could make identifying PSCs particularly challenging for those LLPs that have group structures and chains of ownership which extend beyond the UK.
What constitutes significant influence or control is very broad and will depend on each entity's circumstances. Examples of where an individual has significant influence or control (whether or not exercised) include:
There are some exceptions, albeit a person who may fall within an exception may be a PSC for another reason. The exceptions include:
As you will need to review your LLP agreement and other relevant agreements to assess whether they confer rights of significant influence or control, you may wish to take the opportunity to review and update your LLP agreement.
Failure to take steps to identify PSCs or to give notices required under the PSC regulations to potential PSCs is a criminal offence which is punishable by imprisonment or a fine (or both).
The PSC regulations enable LLPs and companies to impose restrictions on a PSC who (except with court approval) fails to comply with an information disclosure notice. Before imposing restrictions, a warning notice must be served. Interests which can be restricted include rights to vote, receive a profit share, rights to transfer ownership of the membership interest, as well as related exercisable powers (overriding any provisions in a LLP or shareholders' agreement or in a company's articles of association). These rights can be restricted until the person complies with the original disclosure notice.
The Department of Business Innovation & Skills has published statutory and non-statutory guidance on the government website.
LLPs and their subsidiaries need to take action now to identify their PSCs and to set up their PSC registers to avoid committing a criminal offence. We can help you to comply with the new requirements by:
Our professional Partnership team can also assist with any other LLP or partnership related queries and matters, including reviewing and updating your LLP agreements or partnership agreements.