Companies Warned about new Transparency Law!

businessman holding sign shareholder

Does this spell the end of “secretive” company structures?

With effect from 6TH April 2016 every UK Company is required to obtain and hold beneficial ownership or significant control information and, from June 2016, provide this information to a central and publically available registry. The register will be known as the Register of People with Significant Control (PSC) and details from it will be maintained at Companies House. The new regulations apply to all companies and LLP’s including charitable companies; companies limited by guarantee and dormant companies.

Broadly PSC’s are defined as:

A beneficial owner is someone who holds more than 25% of shares or voting rights.

A person with significant control is defined as someone, other than a 25% shareholder, who can exercise control over a company or its management.

Companies will be required to maintain a register in relation to those individuals which will include details of their beneficial owners’ full names, dates of birth, nationalities, and residential addresses as well as details of the nature of their beneficial interest. After providing an initial statement companies will be required to confirm their details annually or when any changes occur. It is expected that the annual confirmation will become part of an amended annual return process.

As is all too familiar the regulations are extremely detailed and not completely straight forward. The underlying theme is that any breach of the regulations is a criminal offence. Whilst most of the onus is on the company to comply, there are various obligations on PSC’s to act and they too can face criminal sanction as well as having restrictions placed on their interest in the company to the extent that they will not be able to vote or have an entitlement to receive income or profit (eg. dividend or sale proceeds) from their interest.

The company will have to demonstrate that it took all reasonable steps to obtain relevant ownership information and there are various notices and confirmations that have to be obtained in order to satisfy the regulations.

There are specific regulations to follow for those companies with more complicated ownership structures, for instance, groups of companies and those with trusts or overseas owners (individuals or companies).

The register will be available for public inspection at Companies House. Some protected information will be only be accessible by certain UK and overseas enforcement authorities; financial institutions and certain businesses and professions undertaking customer due diligence.

Commenting on the new rules, Wende Hubbard, Managing Partner of Burgis & Bullock Chartered Accountants said: “These new rules seem to have slipped by unnoticed by the vast majority of business owners. This is very much a part of an ongoing drive towards increasingly open corporate structures and is very in keeping with the recent leaking of the “Panama Papers” which has seen various off-shore structures closely scrutinised.

Under these new regulations it will no longer be sufficient for companies to disclose that they are owned by an offshore trust, but who the beneficiaries of these trusts are should also be held on public file. Just how much information is eventually forthcoming we’ll have to wait and see but with non-compliance a criminal offence, all companies should be taking this issue extremely seriously”.

For advice and assistance around these new regulations please contact your local Burgis & Bullock office on 0845 177 5500 or use our on-line contact form.

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