New PSC legislation comes into force
The Small Business, Enterprise and Employment Act 2015 received Royal Assent in March 2016. The Act had various implications for businesses, which were due to be implemented in staggered stages.
Some elements, such as the abolition of bearer shares, the extension of directors’ statutory duties to shadow directors and the strengthening of the directors’ disqualification regime, have already come into force.
Not every element will affect every business but the changes relating to People of Significant Control (PSC) are set to have a broad impact. As of April 6 2016, nearly all companies and limited liability partnerships (LLPs) are obliged to set up and maintain a register of their relevant PSC. The owners of businesses that do not comply could face criminal prosecution.
The Small Business, Enterprise and Employment Act 2015 was developed following the 2013 G8 Summit, where it was agreed that there was a need to improve corporate transparency. It was suggested that this would make the UK a more attractive place to do business by improving trust.
It was also envisioned that it would aid the fight against tax evasion and make it more difficult for companies based in the UK to be used for criminal activities including money laundering and terrorist financing.
It also has a number of implications related to insolvency practice and procedures. These include changes to the Company Directors Disqualification Act 1996, such as the requirement to report online the conduct of every director of a company that becomes insolvent.
In terms of setting up a PSC register, it’s important for businesses to recognise their new obligations. The Government says that companies are required to 'take reasonable steps' to identify the People of Significant Control that relate to their business.
This generally means those people who exercise substantial control over the business. More specifically they may meet a condition such as owning more than 25% of the company’s shares and/or voting rights, having the power to appoint to or remove from the board or otherwise having the right to exercise significant influence or control over the business.
By Phil Smith