People with Significant Control - Are We Really Going to Find Out Who They Are?

In my last post I looked at some ways in which the Small Business, Enterprise and Employment Bill attempted to remove some of the red tape involved in running a company.  In this post I look at some new red tape it will introduce when and if enacted in its present form.

Clause 81 and Schedule 3 of the Bill insert new provisions in the Companies Act 2006 aimed at making companies disclose their beneficial owners, which the Bill calls "people with significant control" or (as they will no doubt become known) "PSCs".  A PSC is essentially anyone with a shareholding of over 25% in the company, the right to appoint or remove a majority of its directors, or who "has the right to exercise, or actually exercises, significant influence or control over" the company (to be determined with the help of guidance to be published by the Secretary of State - but this sounds a lot like a "shadow director").

These are essentially the classes of people required to be identified for anti-money laundering compliance purposes, so it should make my job a lot easier filling in customer due diligence forms if I can just look up a new client company's PSCs on the public register accessible via Companies House Direct.  Banks will no doubt make a meal of it and introduce additional compliance procedures before companies can open an account with them, rather than this simplifying the process.

From the company's point of view, it creates a new statutory register of PSCs they will need to create and keep in their statutory books, or they can elect to keep it online at Companies House as one of the registers that can be kept in this way (as mentioned in my last post).  If they keep their own register, they will still need to file particulars at Companies House and confirm them annually in their confirmation statement (aka annual return), in much the same way as if the PSCs were directors.

Some companies may not know who their PSCs actually are, particularly if their shareholdings are held indirectly through nominees.  The Bill therefore gives them power to require disclosure, as public companies have at present, the sanction for non-compliance being service of a "restrictions notice", the effect of which is to suspend voting rights, dividends and the ability to transfer the shares.

Failure to comply with any of this by the company, its officers or the shareholders or PSCs affected is a criminal offence.

On the current timetable, companies will have to start keeping their own PSC registers from January 2016, but will not need to file it until April 2016.  This I suppose is to give them time to serve disclosure notices and receive and collate the replies.  Companies House will also need some time to get the online register up and running.

I wonder, however, how seriously this will be taken by companies under "significant control", which are presumably under the effective control of beneficial owners who wish to remain secret.  If they just register the nominees as PSCs, how will we be able to tell?  Most beneficial owners willingly identify themselves to professional advisers on a confidential basis for anti-money laundering compliance purposes, but may not be so happy to disclose their particulars on a public register - which may cause us some professional difficulties.  In any case, I doubt that real money launderers will register themselves as PSCs.

At least I don't need to worry about our company secretarial service not being needed any more, as whilst a little red tape is removed by one hand, a lot more is tied up by the other hand.