From 6 April 2016, all companies including charities and social enterprises structured as companies (with some exceptions for companies with shares traded on a regulated market) will need to keep a new statutory register alongside their company books - the register of people with significant control (“PSC register”).

Rules requiring details of the information on the PSC register to be filed at least annually with Companies House are due to come into force in June 2016: once filed, this information will be publicly available on a company search.

The PSC register will be used to record the details of individuals and legal entities with significant control over the company (“PSC”s), with a note about the nature of their control. Significant control means:

(a) owning or controlling more than 25% of the shares or voting rights in the company;
(b) having control over the appointment or removal of the majority of the company’s board of directors; or
(c) otherwise having significant influence over the company (guidance on the meaning of “significant influence” was recently issued).

Charities and social enterprises structured as companies will be affected. Most will not have PSCs and will simply need to make a note to that effect in the PSC register. But in some circumstances a detailed entry in the PSC register will be required, including:

  • Corporate foundations. The corporate supporter may be the foundation’s sole member, or have a right to control the identity of the board members.
  • Stakeholder control. Sometimes a third party has rights to control a company’s decisions, or to appoint or remove a majority of the board.
  • Small number of members. If a company has less than four members, they will all be PSCs. This will affect charitable companies which are structured so that the members and trustees are the same people, if there are less than four trustees.
  • Group structures, including trading subsidiaries. A parent charity may have control of its trading subsidiary, or a subsidiary charity. If the parent charity is a charitable trust or unincorporated association, it is likely that the individual trustees will need to be named in the PSC register, even if they hold shares in the subsidiary company via a nominee.
  • Joint ventures. Where charities or social enterprises collaborate through a bespoke company, they may be PSCs, depending on the circumstances.

The company’s PSC register will be accessible to any member of the public provided they have a proper purpose.

All companies will be under a duty to investigate whether they have PSCs. For more complex structures, this will not necessarily be a straightforward exercise. Where companies do not have PSCs, they must keep the situation under review in case circumstances change.

In preparation for the new rules, companies should be taking steps to establish whether they have PSCs and, if so, exactly what they need to do next.

Implications for charitable companies

The new rules are primarily designed to ensure greater disclosure by commercial organisations. They make no changes to the fundamental rule of charity law that it is the charity trustees who are in control of a charity, and they have a legal duty to act independently and in the best interests of the charity at all times.

For most charities that are companies, the PSC regime will simply mean more bureaucracy. In a few cases, the new rules could give rise to concerns about confidentiality. 

If you would like further information or advice on your charity's particular circumstances, please contact our Charity department. 

Posted on 18/02/2016 in Legal Updates

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