Tuesday, 31 March 2015

Transparency of Companies: Beneficial Interests

This is part of a series of posts on the Small Business, Enterprise & Employment Bill that has now come into force on 26 March 2015 following the grant of Royal Assent and is now the Small Business, Enterprise and Employment Act 2015 (“the Act”).
Schedule 3 to the Act (via Part 7 at sections 81-82inserts a new Section 9(d) into the Companies Act 2006 to require that all companies maintain a register of people who have a significant control over the company” (called a PSC Register) and also a new Part 21A of the Companies Act 2006, to set out these requirements, with certain provisions applicable to both “registrable” (i.e. directly owned) and “non-registrable” persons (i.e. those owning through a legal entity such as a trust or offshore company).
This will undoubtedly have consequences for current offshore trusts and tax structures existing through offshore companies.
The Act requires that companies themselves be responsible for determining who should be put on a PSC Register and therefore this obligation (and the risk of error) falls to directors to ensure this register is correct. An error can result in directors being individually subject to criminal proceedings including a prison sentence of up to two years, so it is very important the PSC register is accurately maintained.
We expect that the definition of “significant control” will be widely interpreted but Schedule 1A to the Companies Act 2006 (as inserted) provides a definition that “significant control comprises an individual with at least a 25% shareholding (directly or indirectly) and exercises a “significant control”. However, the threshold for measuring this could be critical. Equally, as previously stated, this is undoubtedly increase the prevalence of shadow directors (although the Act provides for greater risk on their part), but ultimately proving someone is a shadow director is not always that straightforward.
No doubt such changes will have an incredible effect on various tax structures and the use of off-shore companies as shareholders through trust schemes.
However, this register will now be a public document filed at Companies House.
If you are a shareholder or director with concerns over such changes to the legislation, or alternatively may be a creditor or are otherwise concerned as regards the ownership of a company and its future, then please contact Francis Wilks & Jonewho will be able to assist you with the details of such changes.