A change has been made to the Persons of Significant Control (PSC) regime. Under the new system firms must inform Companies House of any changes to beneficial ownership shortly after the change occurs, and will no longer be required (or permitted) to report information about PSCs via the Confirmation Statement. In this article, Matt Bailey, the founder of Gbooks, looks at the background to the change, and how the new system will affect accountants going forward.
The original PSC regime was introduced by the UK government in order to increase corporate transparency and meet a G8 commitment made in 2013. The legal framework was included in the Small Business, Enterprise & Employment Act 2015, and the rules came into force in April 2016.
The PSC requirements began at the same time as confirmation statements were introduced and, under the Companies Act 2006 section 853I, firms were required to include details of PSCs when filing a confirmation statement. There was no requirement to notify the Registrar of changes to PSC information between confirmation statements.
The 4th EU anti money laundering directive, enacted on 25 June 2015, contains a requirement that “Member States shall ensure that corporate and other legal entities incorporated within their territory are required to obtain and hold … information on their beneficial ownership”. It goes on to state that this information must be held in a central register, and that “Member States shall require that the information held in the central register… is adequate, accurate and current”. EU members were given a two-year window to comply with the new rules.
While the UK was ahead of the curve on most of the directive’s beneficial ownership requirements, the need for the information held on the central register to be “current” was not being met.
Under the old regime a firm could identify a new PSC, or the details of an existing PSC could change, the day after a confirmation statement date. However, the firm was only required to update the central register a year later when the next confirmation statement was due.
The UK has modified its PSC regime to meet the requirements of the EU directive. The general election, and the resulting hung parliament, created uncertainty in terms of timing, but the changes were implemented (by statutory instrument) immediately prior to the two-year implementation deadline. Companies House updated its systems on 26 June 2017.
Under the new rules changes to PSCs become an “event driven” filing, similar to changes in officer details. The various deadlines are as follows:
If a company has reasonable cause to believe an entity has ceased to be a PSC, or that the details of a PSC have changed, they must contact the person to confirm the change within the following 14 days (the previous deadline was “as soon as practicable”);
On receiving the confirmation (due within a month, as before) the firm must update the PSC register within the following 14 days (no grace period was given in the previous regime); and
Firms that have not elected to keep the PSC register at Companies House must notify the registrar within the following 14 days after the register has been updated (no deadline applied previously).
Failure to follow these requirements is a criminal offence and can result in a fine or a prison sentence of up to two years.
The Companies House forms to notify of changes to PSCs (PSC01-09, or LLPSC01-09 for LLPs) were already in place and are largely unchanged. The confirmation statement form has been modified, with the section asking for details of current PSCs removed entirely from the “additional information” supplement. Firms are instead required to confirm that the PSC information (along with most other company data) held at the registrar was accurate at the time of the confirmation statement.
So where are accountants left by these changes? One big change is in the filing of confirmation statements, with the onus now on checking that the PSC information held by the registrar is correct before filing the CS01. On a practical note, uncertainty over the timing of the changes (plus other distractions such as MTD) may mean some software providers are not yet ready for the new regime.
And, most importantly, accountants should advise their clients on the new deadlines, in particular the requirement to notify the registrar within 14 days of any changes to the PSC register. While I somehow doubt I’ll ever read the headline “Director jailed for PSC notification failures”, it’s better to be safe than sorry.