NEW STATUTORY FRAMEWORK FOR CORPORATE ACCOUNTABILITY AND TRANSPARENCY – UK

In accordance with the implementation plan the ‘UK implementation of the G20 High Level Principles on Beneficial Ownership Transparency’ the UK has taken active measures to improve corporate transparency and accountability. On the 26th of March 2015 the Small Business, Enterprise and Employment Act 2015 (hereinafter “the Act”) came into effect introducing wide ranging changes to UK company law. Some of the key changes affecting UK companies include:

  • The abolition of bearer shares as of the 26th of May 2015 (with a nine months’ transitional period for existing bearer shares)
  • The prohibition on the use of corporate directors
  • Increased liability of nominee or ‘shadow directors’ who will be accountable under sections 170 to 177 of the Companies Act 2006
  • Changes to company filing and annual return processes
  • The controversial new requirement for companies to maintain a register of Persons with Significant Control (“PSC”) – publicly available in April 2016.

INFORMATION TO BE RECORDED ON PSC REGISTER

The PSC register must include the following information (protected information including residential addresses and dates of birth are not included on the public register):

  • Individuals – Name, service address, country or state of usual residence, nationality, date of birth, usual residential address and, if restrictions on using or disclosing any of the individual’s PSC particulars are in force;
  • Legal entities – Corporate or firm name, registered or principal office, legal form of the entity and law by which it is governed, details of the register of companies in which it is entered and registration number (if applicable); and
  • in all cases, the PSC register must also contain details of the date on which a person became a registrable person or registrable relevant legal entity and the nature of his or its control.

SIGNIFICANT INFLUENCE OR CONTROL

To clarify the term ‘significant influence or control’ the UK Government has issued Draft Statutory Guidance on the meaning of “Significant Influence or control” over companies in the context of the Register of People with Significant Control (hereinafter “the Guidance”). The Guidance elaborates on the conditions set out in Schedule 1A of the Companies Act 2006, that an individual is a PSC where the individual:

  • holds more than 25% of a company’s shares
  • holds, directly, or indirectly more than 25% of the voting rights of a company
  • holds the right, directly or indirectly, to appoint or remove a majority of the board of directors of a company
  • has the right to exercise, or actually exercises, significant influence or control over company
  • the trustees of a trust or the members of a firm that is not a legal person that meets at least one of the other specified conditions (in their capacity as such) or would do if they were individuals and the individual, has the right to exercise, or actually exercises, significant influence or control over a company

According to the Guidance control exists where an individual can direct the activities of a company whereas when an individual can ensure that their guidance is adopted and/or implemented by a company this is indicative of ‘significant influence’. The exercise of such control or influence does not have to be for the purpose of economic gain.

IMPLEMENTATION AND SANCTIONS

Failure to comply with the new rules is a criminal offence and sanctions may be imposed against the Company, directors and secretary and PSCs. As Companies commence collecting the required information for PSCs the Act also enables the Company to impose sanctions on shareholders who fail to comply with their disclosure requirements such as loss of voting rights and transfer restrictions without the requirement for a court order.

WAY FORWARD

The new UK statutory framework for corporate transparency and accountability has wide ranging effects which companies and PSCs must consider carefully.

Please contact us for professional assistance and advise at solutions@oxfordcy.com and our legal advisors will be pleased to assist you.