The Person of Significant Control Standards - Explained


Is Your Business Compliant?

Running a business is no easy feat, particularly when rules and regulations are continually evolving. April 6th saw the introduction of a new law, with the Department for Business Innovation and Skills making it compulsory for companies, LLPs and SEs to keep a register of 'people with significant control' (PSC) within their operations. The new legislation is part of The Small Business Enterprise and Employment Act 2015, which calls on businesses to compile and maintain lists of keynote persons.

Since 30th June, these laws have tightened even further. Existing UK companies are now required to incorporate PSC Register information (soon to be reamed confirmation statements) when submitting Companies House annual returns, while all new companies must submit a “statement of initial significant control” when putting forward initial Companies House applications.

How is a “person of significant control” defined?

The keynote question associated with these new regulations is how a “person of significant control” is defined. Businesses are instructed to refer to four main criteria, with PSCs only needing to meet one or more of the conditions, as outlined below.

  1. Whether directly or indirectly, the individual holds more than 25% of the company’s shares or voting rights.
  2. The individual is empowered to appoint or remove a majority of members on the company’s board of directors.
  3. The individual has significant influence or control over the company.
  4. Trustees or partners meet one of more of the above conditions, with the power to exercise significant influence or control over the company.

What to include?

Once identified the Department for Business Innovation and Skills calls for certain information to be included on the PSC register. For individuals, this includes name, service address, nationality, country or state of residence, date of birth and residential address.

Your responsibilities as a business

As deemed by the Act, businesses are under obligation to identify all ‘registerable’ persons with significant control. Post-registration, they remain under a duty to investigate, obtain and update information on identified PSCs. Correspondingly, PSCs have a reciprocal responsibility to notify companies of new powers within one month of acquisition.

Failure to comply may result in suspended controls via a restriction notice issued by the Department for Business Innovation and Skills. Providing false or misleading information could also lead to criminal offence charges, with liability, fines and prison sentences all on the table. Basically, it pays to stay on top of PSC registers.

While the Department for Business Innovation and Skills has released a 14-page statutory guidance document, we understand that the changes can be confusing for small to medium sized businesses. If you want to ensure your business complies with the new PSC laws, get in touch with Kingsland Business Recovery to chat with one of our in-house experts about tailored, down to earth solutions for your SME.

From identifying PSCs, assuming registers and submitting Companies House filings, we’re on-hand to help you meet the 30th June 2016 deadline, and remain complaint.  

How will these changes affect insolvencies?

Historically, there has been a lack of transparency (or even rule bending) regarding the real owners of a business. It’s a regular occurrence that a partner, child, father or friend is listed on the paperwork but in reality they’re just a patsy for the actual person in charge.

The lack of transparency is often abused by disqualified directors who put someone else on the official records to make it appear that they are the ones in charge. This makes it extremely difficult for the insolvency practitioner because he/she can usually only pursue the named director. Unless, of course, it can be demonstrated that there is a shadow director involved, although this is often difficult to prove.

Hopefully this change of law will force businesses to be more transparent. That said, policing this change in legislation will be a different matter. Some people will still have shadow directors and not disclose the true owners. Then comes the awkward part where what if the “de-facto” director is disqualified as a result of the actions of the shadow director? If the PSC hasn’t been disclosed from the onset, then disclosing them post insolvency (in the hope that the de-facto director says they had nothing to do with it and was merely on the paperwork) will also be a breach of rules and a guaranteed way of the de-facto and shadow directors getting disqualified. Will this make a huge difference? Well, let’s see how it impacts on insolvencies going forward.”

If you are considering insolvency, then Kingsland Business Recovery can help you weigh up the options that are available. To discuss further please feel free to contact one of our directors on 0800 955 3595 for a no obligation, confidential chat. Or alternatively, drop us an email at info@kingslandbr.co.uk.

 

 

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