Register of People with Significant Control - does it apply to your university and subsidiaries?

As the end of the financial year rapidly approaches many universities have asked whether they, or their subsidiary trading companies, have to keep a Register of People with Significant Control (PSC).

The requirement to keep a Register was introduced by the Small Business, Enterprise and Employment Act 2015, amending the Companies Act 2006 by inserting section 21A.  From 6 April 2016, companies, Societas Europaeae and Limited Liability Partnerships will, in addition to keeping a register of members and directors, have to keep a register of individuals or legal entities that have significant control over them. This information has to be filed annually by 30 June at Companies House in a Confirmation Statement, which replaces the Annual Return from June 2016.

Section 21A of the Act is a ‘statutory trail’ that must be worked through to discover whether a company must keep the Register. Companies must register any ‘registrable individual’ or ‘registrable relevant legal entity’ that has significant control over them – these terms, and what constitutes significant control, are defined in the Act. Those with significant control include those that: directly/indirectly hold more than 25% of the shares or voting rights; directly/indirectly hold the right to appoint or remove a majority of directors; or otherwise have the right to, or actually exercise, significant control over the activities of the company or, in certain circumstances, trust or firm without legal personality (e.g. English Limited Partnerships).

The first piece of good news for many universities is that if they are a statutory or chartered body as many are, and therefore not a company for the purposes of the Companies Act 2006, they are not subject to the requirement to keep a PSC themselves. However, other universities or HEIs taking a different legal form may be subject to the requirements, particularly those that are private companies.

Many universities which are statutory and chartered bodies will have wholly owned trading subsidiaries which they use to transact commercial business. These companies will usually take the form of Companies Act companies, usually companies limited by shares, and will therefore have to keep a Register of PSC themselves. But what should such companies record in their Register? Are there any ‘registrable individuals’ or ‘registrable relevant legal entities’ in relation to these wholly owned subsidiaries? When their owners are statutory or chartered bodies the answer to this question will usually be no. Statutory/chartered bodies are clearly not capable of being ‘registrable individuals’, but neither are they ‘relevant’ legal entities, as they are not ‘subject to their own disclosure requirements’ as required by the Act for a ‘relevant’ legal entity. So, the wholly owned subsidiary company of a statutory/chartered corporation must keep a PSC register, but it may enter the phrase “The company knows or has reasonable cause to believe that there is no registrable person or registrable relevant legal entity in relation to the company” (as suggested by BIS guidance Register of People with Significant Control – Guidance for Companies, Societates Europaeae and LLPs).

Any university that has ‘chains’ of companies however (e.g. a wholly owned subsidiary company that then owns further companies) may find that those further down the chain are required to enter something further in their Register of PSC than the above sentence: clearly each university should take legal advice about its individual position, and the position of its subsidiary companies, in relation to the requirement to keep a Register.

However, there is some leeway in the requirement to keep a PSC Register at present, in that those companies which must keep a Register from 6 April may, whilst making enquiries into who has significant control over them, enter the phrase “the company has not yet completed taking reasonable steps to find out if there is anyone who is a registrable person or a registrable relevant legal entity in relation to the company” in their Register until such (reasonable) time that they have taken such steps.

The important thing is that, if you are obliged to keep a Register, it must not be empty on 6 April and the information contained within it is with Companies House in your Confirmation Statement by 30th June. Failure to do so will be a criminal offence.

Hester Fairclough 

Paralegal, Education

T: 0121 214 0565

E: hester.fairclough@shma.co.uk

 

 

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