Persons with Significant Control: tighter enforcement on the horizon

Oct 25, 2018

Now that businesses are (or should be!) familiar with the ‘persons with significant control’ (PSC) disclosure rules, which came into force in April 2016, Companies House is stepping up its enforcement of the rules.  It will also make its communications and guidance on the PSC rules as clear as possible to help businesses comply and file effectively.

By way of reminder, the PSC register is a central public register which includes details of all individuals owning or controlling more than 25% of a company’s shares/voting rights (or who otherwise exercise significant influence or control over the company or its management).  However, Companies House is concerned that some companies are misunderstanding the requirements, or worse, deliberately submitting false information; or none at all.

The PSC rules include requirements on companies (and LLPs and other entities) to take reasonable steps to determine if they have any PSCs, identify them and record them in their PSC register.  They must then file the information at Companies House.

Tighter enforcement
In its Business Plan 2018/2019, Companies House says it will become more vigorous in enforcing the rules. This is against the background of the continued battle against money laundering.  Though the rules are clear (a fact acknowledged by Companies House), there are still companies that are not compliant because they have failed to understand their obligations.

Companies House therefore says it will:

  • contact companies it believes have misunderstood the PSC requirements, to ensure the relevant records are corrected and ensure on-going compliance
  • work with law enforcement authorities so that information is shared correctly, and to “support the tackling of economic crime”. This will include working with The Insolvency Service criminal enforcement team
  • pursue businesses who have failed to provide the relevant PSC information in their confirmation statements, or failed to provide a statement of additional matters, and
  • follow up with companies and PSCs where they have issued notices to their PSC (asking the PSCs to provide them with information), or issued restrictions (where a PSC has failed to provide information), to ensure they update the information on their company records

Where there has been a complaint about missing or incorrect PSC information, the organisation will be expected to become compliant.

Next year, the government intends to review the effectiveness of the PSC register.

What does this mean?
The PSC rules are clearly drafted, and businesses have now had more than two years to get to grips with the rules.  Whilst Companies House would appear to be taking a gentle approach in contacting non-complaint companies in the first instance, it is clear non-compliance will not be tolerated.  Companies that continue to fail in their obligations can expect penalties further down the road.

How can we help?
At Herrington Carmichael, our expert corporate lawyers provide the full range of services to corporate clients. With the increasingly stringent requirements on companies to ensure corporate transparency, we will advise you and your company on your obligations and responsibilities.  If you have any concerns as to how the new PSC rules apply to your organisation, contact us straightaway.

Contact Michelle Lamberth on 0118 977 4045