Who has ‘significant control’ over your business?
All company owners will be familiar with the Annual Return (a statement confirming the directors and shareholders who operate and own a limited company) which has been a feature of corporate governance and annual public filing since the 1948 Companies Act.
However, from 30th June 2016 a new Confirmation Statement replaced the Annual Return. Its purpose is very similar: it enables companies to provide up to date information to the public register. The key difference is that it is now the company’s annual responsibility to make sure the information is up to date and correct.
One particular aspect of the Confirmation Statement that is new to all UK limited companies is the register of people with significant control (PSC). UK companies (as well as LLP’s and other European entities) are now required to submit this additional information at Companies House to improve transparency over who actually owns and controls UK companies and will help inform investors when they are considering investing in a company. It will also support law enforcement agencies in money laundering investigations.
A person of significant control is someone who holds more than 25% of shares, or more than 25% of voting rights in a company. It could also be the individual who has the power to appoint or remove the majority of the board of directors of the company. These conditions can be met either directly or indirectly through another entity. In some limited circumstances a PSC may also be an individual who simply has the right to exercise, or actually exercises, significant influence or control over the company.
It is the company’s responsibility to keep a record of details for each person, including which conditions were met and the date they became a PSC. If the information cannot be provided, there must be an explanation as to why this is not available. Not meeting these requirements could result in a fine or prison sentence of up to two years.