22 April 2015
Introduction of Beneficial Ownership Register for UK Companies
The Small Business, Enterprise and Employment Act 2015 gained Royal Assent on 26 March 2015. The Act will apply to all UK incorporated companies, unless they are exempt.
The Government has stated that the Act will open up new opportunities for small firms to innovate, compete and get finance to create jobs, grow and export. It will bring about a number of fundamental changes to UK company law including, amongst others, the abolition of bearer shares and corporations acting as directors.
The Act also brings about the establishment of a central public registry of those individuals who hold significant control of UK companies. The Act requires most UK companies to identify those “persons with significant control” (“PSCs”) over the company and a register of those persons will be kept. The PSC register will be publically available and it is expected to be fully searchable and freely available online.
Some corporate entities fall outside of the remit of the Act. This includes Limited Liability Partnerships and companies with securities listed on a regulated market that are already subject to Chapter 5 of the Disclosure and Transparency Rules sourcebook. It also includes companies excluded at the discretion of the Secretary of State for “special reasons”, although it is not yet clear what might be considered “special reasons”.
A PSC is defined as an individual who ultimately owns or controls more than 25% of a company’s shares or voting rights or, who otherwise exercises significant influence or control over a company or its management. It is anticipated that the UK Government will issue guidance to assist companies in determining whether an individual exercises “significant influence or control”.
It will be a requirement for a company to take reasonable steps to identify people they know or suspect to hold significant influence or control. If they fail to do so they risk being convicted of a criminal offence.
The PSC register will be expected to be utilised as a matter of corporate best practice as part of any due diligence process. It is likely that it will be included in any company searches undertaken by a party before entering into a transaction with a UK company.
In addition to this, the PSC register will provide greater clarity over company ownership and control to both regulatory and criminal enforcement agencies in the UK and abroad. Over the years, enforcement agencies have had difficulties with establishing the necessary criminal intent of many corporate criminal offences.
For the majority of criminal offences, a company can only be criminally liable if it can be established that the directing mind was involved in the commission of the offence. Identifying a directing mind within a company can be very difficult for the authorities, especially in companies where they operate at a multinational level.
Companies will be required to maintain a PSC register from January 2016 and provide this information to Companies House for inclusion on the public register from April 2016 onwards. The full impact of the Act on UK companies will not be seen for some time. However the UK authorities may see this as a step forward in their efforts to ensure successful prosecutions against companies who concern themselves in financial crime.
Slater and Gordon UK have an expert team of Business Crime Solicitors available for any legal advice you may need for your organisation. Contact us on freephone 0800 916 9054 or contact us online and we will call you.
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