The Register of People with Significant Control

Transcription

1 The Register of People with Significant Control 30 March 2016 King & Wood Mallesons LLP This document is a summary of the relevant law and is not intended to be comprehensive. It is intended to highlight potential issues and provide general information and not to provide legal advice. You should not take, or refrain from taking, action based on its content. Although care has been taken to ensure that the information is accurate as at the date above, no responsibility is accepted by King & Wood Mallesons LLP, its partners or employees for any information included in (or omitted from) this document. If you have any questions, or if you wish to take specific advice, please speak to your King & Wood Mallesons contact.

2 THE REGISTER OF PEOPLE WITH SIGNIFICANT CONTROL Overview Major changes to UK company law come into force on 6 April 2016, which will require individuals that have "significant control" (PSCs) over an unquoted UK company or limited liability partnership to be named on a public register. The purpose of the new rules is to identify the individuals with control who previously might not have been identifiable as a result of complex corporate or trust structures. Companies must keep a register of their PSCs from 6 April This will be one of the company s statutory registers, with similar content to the register of directors. The register must be open for public inspection, so long as this is for a proper purpose". From 30 June 2016, companies must also provide their PSC information to Companies House upon incorporation and each time they deliver their annual "confirmation statement" (which replaces the annual return). There are criminal penalties for companies and their officers, PSCs, and others, if they do not comply with the rules. The government has provided extensive guidance on the new regime. This also contains examples of the notices that companies and LLPs must send out to investigate whether they have any PSCs. The new rules are contained in a new Chapter 21A and Schedules 1A and 1B of the Companies Act 2006 and the Register of People with Significant Control Regulations Which organisations must keep a PSC register? The new rules apply to unquoted UK companies, as well as (under separate regulations) UK limited liability partnerships and Societates Europaeae. This note focuses on UK companies, but the rules are very similar for UK LLPs and SEs, with some changes to suit their circumstances. There is a brief section on how the rules apply to UK LLPs at the end. Quoted UK companies that must comply with DTR 5 of the FCA s Disclosure Rules and Transparency Rules do not have to keep a PSC register, on the basis that their significant investors should already be a matter of public record. There are similar exemptions for UK companies that have voting shares quoted elsewhere on an EEA regulated market or major markets in the USA, Japan, Switzerland or Israel. However, the UK subsidiaries of quoted companies will have to keep a PSC register. UK Limited Partnerships do not have to keep a PSC register. However, the Fourth Money Laundering Directive requires the UK to introduce similar disclosure rules for Scottish Limited Partnerships by 26 June 2017 (although this date may be brought forward). People with significant control the five PSC conditions The object of the new law is to identify individuals with significant control. (For these purposes, government bodies, corporations sole and some international organisations are treated as individuals.) However, it is important to note that, although the aim is to identify individuals, in some circumstances a legal entity must be recorded on the PSC register. This is explained further below. The new law says that an individual has significant control over a company if he or she satisfies any one of the following five conditions: 1. Holding, directly or indirectly, more than 25 percent of its shares (by nominal value); 2. Holding, directly or indirectly, more than 25 percent of its voting rights (at general meetings); 3. Holding, directly or indirectly, the right to appoint or remove a majority of its board of directors; 4. Having the right to exercise, or actually exercising significant influence or control over it; or 5. Having the right to exercise, or actually exercising significant influence or control over a trust or a firm without separate legal personality (such as an English limited partnership) whose -2-

3 trustees or partners meet any of the four conditions above. This is designed to capture those who "pull the strings" of a trust or partnership that has significant control over a company. The government has published statutory guidance for companies on what is meant by "significant influence or control" under the fourth and fifth PSC conditions (see box). Interpreting the five PSC conditions Indirect holdings and "majority stakes" Under the first three PSC conditions, the shares or rights can be held directly, or indirectly. The rules treat someone as holding shares or rights indirectly if they are held by a legal entity (or a chain of legal entities) in which he (or another chain entity) has a majority stake. The main test for a majority stake in a legal entity is holding a majority of its voting rights. The other tests for a majority stake are: being a member of the legal entity with the right to appoint or remove a board majority; being a member of the legal entity who alone controls (by agreement with the other members) a majority of the voting rights; or having the right to exercise, or actually exercising, dominant influence or control over the legal entity. In effect, the rules assume that someone who has majority control over one company can control any shares or rights it holds in another company. Key point: a direct holding of over 25% of shares or voting rights in a company is enough to make someone a PSC. But (generally) you need over 50% of voting rights in one company to be an indirect holder of shares or rights in another company. Anti-avoidance rules The rules also recognise that people can hold shares or rights in other ways, and contain provisions to ensure these also come within the scope of the regime. For example, the rules: look through a nominee shareholder to the underlying investor generally, treat someone who controls a right as holding it (e.g. if the right can only be exercised with his consent or instructions) this is an important point for discretionary investment managers treat joint holders (or the parties to an agreement to use their rights in a pre-determined way) as each holding their combined shares/rights. Exceptions There are exceptions that allow some common investment situations to fall outside the scope of the regime: a limited partner in a UK limited partnership (or an equivalent foreign limited partnership), who does not participate in managing the partnership, will not usually meet any of the first three PSC conditions in relation to the companies in which the partnership invests where a person uses his shares as security for a bank loan, the shares and rights are generally regarded as remaining with him, rather than transferring to the bank where someone has a right that he can only exercise in circumstances outside his control, the right can be disregarded until those circumstances arise e.g. an option to buy shares that doesn t vest before a certain date, or the right to appoint a director if the company fails to meet agreed milestones. -3-

4 Significant influence or control (SIOC) key points from the statutory guidance on conditions 4 and 5 Someone with control can direct an organisation's policies or activities. Significant influence enables someone to ensure an organisation adopts the policies or activities he wants. The right to exercise SIOC may come from the company s constitution, a shareholder agreement or some other agreement. It could include sole decision rights over key aspects of the business: e.g. the business plan; making additional borrowing; appointing/removing the CEO; or adopting/changing incentive plans and granting options. It could also include some sole veto rights. E.g. over adopting/amending the business plan, making additional borrowing (except as a minority protection), or appointing a board majority. But it would not usually include minority protection vetoes: e.g. on changes to the constitution, dilution, borrowing beyond agreed amounts, fundamental business changes, winding up. Someone whose directions/recommendations are generally followed by majority shareholders or a significant number of directors may have actual SIOC (e.g. a "shadow director"). There are exceptions for acting in certain roles, provided this does not go beyond what is usual: e.g. professional advisers, third party contractors (including lenders), employees or directors. Under the fifth condition, the right to direct the running of a trust or partnership would amount to SIOC over it. E.g. the right to change the trustees/partners, to direct fund/asset distributions or investment decisions, to amend the constitution or end the trust/partnership. Someone whose instructions are generally followed by the trustees/partners will usually have actual SIOC. Someone who controls a limited partnership s management or activities will have SIOC (usually, the general partner). Who must a company include on its PSC register? Direct holdings In a simple situation, a PSC who holds his shares or rights directly in a UK company must be named on its PSC register. Indirect holdings There will also be more complicated situations where a PSC holds his shares or rights indirectly. As explained above, the rules treat someone as holding shares or rights indirectly if they are held by a legal entity (or a chain of legal entities) in which he has a majority stake. As a result, in a chain of UK companies in which an individual holds the majority of voting rights in the top company, he could (in theory) be required also to be registered as a PSC on each subsidiary company s register. However, the rules recognise this is unnecessary and contain some administrative provisions designed to prevent these duplicate registrations. Avoiding duplicate registrations The effect of these provisions is that in a group of UK companies a company should usually only have to record on its PSC register the next UK company in the chain above it. Only the UK holding company at the top (unless it is a quoted company) will need to record individual PSCs, if any, on its PSC register. -4-

5 The thinking behind this is that if someone looks at a company s PSC register and sees that a UK company is registered, he can then look at the PSC register of that UK company if he wants to investigate further and so on up the chain until he identifies any individuals with significant control. The rules use the term registrable Relevant Legal Entities (RLEs) for UK companies (and some other entities) that can be registered on another UK company s PSC register (see box). Relevant Legal Entities The rules say that: a company must not register a PSC who only holds all his interests in the company through an RLE over which he has significant control a company must register an RLE on its PSC register (unless the RLE only holds all its interests in the company through another RLE over which it has significant control e.g. a chain of UK companies). For a legal entity to be an RLE, it must: (a) itself meet one of the five tests for a PSC if it was an individual (e.g. hold more than 25% of voting rights); and (b) be subject to its own disclosure requirements. RLEs will usually be UK companies and LLPs that must keep their own PSC registers, but RLEs can also be quoted companies that must comply with DTR 5 of the FCA s Disclosure Rules and Transparency Rules, or that have voting shares quoted on an EEA regulated market or major markets in the USA, Japan, Switzerland or Israel. Key point: unquoted overseas companies (and some quoted overseas companies) cannot be RLEs, so must not be included on a PSC register. As a result, it is always necessary to look through an unquoted overseas company and consider if someone has a majority stake in it that would make them registrable in relation to an underlying UK company. There are some examples of how this applies in Appendix 1 of this note. Appendix 2 considers how the rules apply to investments in companies through limited partnerships, such as private equity funds. It is important to note, however, that the chain principle described above does not apply where an individual or RLE has any "interest" in a UK company lower down the chain which is not held through an RLE, i.e. shares, voting rights or the right to appoint/remove a director of a UK subsidiary, or where an individual or RLE has some other right to exercise, or actually exercises, significant influence or control" over a UK subsidiary under condition 4, which would make them registrable on the UK subsidiary s PSC register. The legislation also appears to be flawed in that where an individual or RLE satisfies condition 5 (significant influence or control over a trust or partnership that has significant control over a UK company), it would appear they cannot just be registered on the PSC register of the top UK company in the chain, they must also be registered on the PSC register of each UK subsidiary lower down the chain. Obligations to send and respond to notices Company s obligations A company must take reasonable steps to find out if it has any registrable PSCs and RLEs and include them on its PSC register. It must also keep the register up to date. This includes (but is not limited to) sending information requests to anyone the company has reason to believe is a registrable PSC or RLE, or whose status or details on the register have changed. Examples of the notices that companies must send are included in the government's guidance, and in Appendix 3 to this note. The company can also send notices to anyone else it reasonably believes knows the identity of a registrable PSC, or any RLE or similar entity, or anyone likely to have this knowledge. -5-

6 Reasonable steps The government s guidance says that a company should start by considering all the documents and information it has to identify if it has a registrable PSC or RLE, including its constitution, register of members and shareholder or other agreements. It should consider all the interests held in the company and whether there is evidence of joint arrangements, or rights held in various ways that may be controlled by the same person. There is no need for the company to send a notice if it already has the information it needs about a registrable RLE. However, the company will always need to send a notice if there is a registrable PSC, unless he has already provided all his details (or they have been provided with his knowledge). Obligations on PSCs and others Anyone sent a notice has one month to respond to it. But, in any case, even if the company has not sent them a notice, registrable PSCs and RLEs must disclose their details to the company within two months once they ought reasonably to know about their status.. Registrable PSCs and RLEs must also notify any relevant changes to their details (e.g. a change of address, or sale of shares). If a PSC or RLE has not received a notice from the company within one month of the change, it has until two months after the change to update the company (or one month after discovering the change, if this is later). Example letters from PSCs/RLEs are included in Appendix 3. Sanctions for non-compliance Criminal offences There are criminal penalties for companies, PSCs, RLEs and anyone else sent notices, and in the case of companies and other legal entities, their defaulting officers, if they do not comply with the new regime. It is also a criminal offence to provide false information knowingly or recklessly in response to a notice. At the extreme end, these penalties can include up to two years gaol and/or a fine. Restricting the shares There is also a detailed set of rules that allows a company to impose restrictions on the relevant shares or rights if there is non-compliance with its information requests. Restrictions would include bans on exercising rights, transferring shares or rights, being issued further shares or being paid dividends (except in a winding up). The rules do not require companies to impose restrictions, but the government s guidance says that a company must seriously consider doing so as part of its obligation to take reasonable steps (and be able to justify any decision not to impose restrictions). Before deciding to impose restrictions, the company must give one month's warning and also consider the impact on the rights of third parties. The company must withdraw the restrictions if its information request is subsequently complied with, or a valid reason is given for non-compliance (e.g. illness or other incapacity of the recipient, but not logistical reasons), or if third party rights are unfairly affected. Those aggrieved can also apply to court to remove the restrictions, and the court can order the sale of the shares. Content of the PSC register What details must a company include? A company s PSC register must contain similar details as for its register of directors, plus a statement of the nature of control. A company must include a registrable RLE on the register once the company is aware of -6-

7 the RLE s status. But a company can only include a registrable PSC when he has provided all his details (or if they are provided with his knowledge). The PSC register Registrable PSCs name service address usual residential address country/state/part of UK of residence nationality date of birth date the PSC became registrable nature of control whether Companies House has agreed any restrictions on disclosing the PSC s details Registrable RLEs name registered office legal form and governing law company registry company registration number date the RLE became registrable nature of control A company s PSC register can never be empty. The company must keep the register up-to-date at all times with the status of its enquiries, and whether there has been non-compliance, or restrictions imposed. The rules set out statements that must be included on the register for each stage in the process. Recording the nature of control The company must also use prescribed statements to record the nature of a PSC's or RLE's control, identifying which of the five conditions is satisfied. For condition 1 (more than 25% of shares) and condition 2 (more than 25% of voting rights), the register does not have to record the exact percentage, but will instead identify which of three broad bands applies. These are: more than 25% up to 50%; more than 50% but less than 75%; 75% or more. Helpfully, if conditions 1, 2 or 3 apply, there is no need to state whether the PSC or RLE also exercises significant influence or control under condition 4. Public register A company's PSC register must be open to public inspection by anyone with a "proper purpose, in a similar way to its register of members. It must be free to inspect, and the company can charge a maximum fee of 12 for a copy. From 30 June 2016, companies must file their PSC information at Companies House at the time the company is incorporated and annually after that when they deliver their "confirmation statement" (which replace annual returns from 30 June). However, companies will have to file their PSC information more frequently from 26 June 2017 when the EU Fourth Money Laundering Directive comes into force (although this date may be brought forward). Protection of PSC information Residential addresses and day of birth As with directors, the residential addresses of PSCs will not be available to the general public, but will be available to government authorities and credit reference agencies, and a PSC s day of birth will not be visible at Companies House. A company or PSC can apply to Companies House for a PSC s residential address to be withheld from credit reference agencies, but only on the grounds that the PSC or someone he or she lives with is at serious risk of violence or intimidation as a result of the activities of the company (or another company or LLP of which the person is, or has been, a PSC, director or LLP member), or if the information is already subject to a Companies House protection order. PSC s name and other information A company or PSC can also apply to Companies House for a PSC s name and other details to be omitted from the public register, but only on the grounds that the PSC or someone he or she lives with is at serious -7-

8 risk of violence or intimidation as a result of the activities of the company, or their characteristics or personal attributes when associated with the company. The information will still be available to government authorities (but not credit reference agencies). During the application process, both Companies House and the company must protect the PSC s information. If Companies House refuses the application, it may be possible to appeal to the court. Transitional arrangements There are also transitional arrangements for PSCs that are registrable on 6 April 2016 who apply to Companies House for their information to be protected by 30 June 2016, but are refused. They have 12 weeks to make themselves non-registrable (e.g. to sell down their shares) from the date of Companies House s refusal, or the dismissal or abandonment of any subsequent appeal to the High Court. Option to keep PSC and other registers at Companies House From 30 June 2016, a private company can elect to keep its PSC register at Companies House, along with other registers, such as the register of members, directors and secretaries, instead of having to maintain its own separate registers, in order to cut down on administration. While in principle this sounds helpful, it may be more suitable for small owner-managed businesses whose information changes infrequently and/or where there are reduced confidentiality concerns (for example, if the registers themselves are kept at Companies House, the day of birth for a PSC or director would be visible to the public, as would all shareholder addresses). Limited Liability Partnerships A separate set of regulations requires UK LLPs to keep a PSC register, and adapts the above provisions to LLPs, with some changes to suit the characteristics of LLPs. These are the Limited Liability Partnerships (Register of People with Significant Control) Regulations The five conditions for significant control The most important differences relate to the first three of the five conditions for significant control of an LLP. Under the LLP regulations, an individual has significant control over an LLP if he or she satisfies any one of the following five conditions: Holding, directly or indirectly, the right to share in more than 25 per cent of any surplus assets of the LLP on winding up; Holding, directly or indirectly, more than 25 per cent of members voting rights; Holding, directly or indirectly, the right to appoint or remove a majority of persons entitled to take part in the LLP s management; Having the right to exercise, or actually exercising significant influence or control over it; or Having the right to exercise, or actually exercising significant influence or control over a trust or firm without separate legal personality whose trustees or members satisfy any of the first four conditions. Guidance on significant influence or control The government has also published separate statutory guidance for LLPs on what is meant by "significant influence or control" under the fourth and fifth conditions. This is similar to its meaning in relation to companies, discussed above, but there are changes to address the circumstances for LLPs. Key point: under the guidance, a person will have significant influence or control if they are likely to receive more than 25 per cent of the LLP s profits. -8-

9 The future All EU member states have to implement the EU Fourth Money Laundering Directive by 26 June 2017 (although this date may be brought forward). Among other things, the Directive requires all corporate and legal entities across the EU to maintain information about their beneficial owners and provide this to a central registry (such as Companies House in the UK). Similar obligations will apply to trusts, although the information will not need to be provided to a central registry unless the trust "generates tax consequences". Although the UK has been ahead of other EU member states in creating its own central register, the PSC regime does not align fully with the Directive and so will have to be amended as part of the Directive s UK implementation. In particular, the government has indicated that it will have to extend the rules to Scottish Limited Partnerships and some other entities. Also, as the Directive requires the entries at the central registry to be current, rather than submitted annually, the government will need to increase the frequency of filings. The government has said that it intends to consult on these changes during

10 APPENDIX 1 BASIC STRUCTURES Example 1 simple UK-only structure 30% Y 51% UK 1 Ltd UK 2 Ltd In Example 1: Y, an individual, holds more than 25% of the voting rights in UK 1 Ltd. Y is a PSC in relation to UK 1 Ltd, and must be included on its PSC register. Y s 51% of voting rights in UK 1 Ltd also constitutes a majority stake in UK 1 Ltd. Under the rules, this means Y indirectly holds the 30% of voting rights in UK 2 Ltd. As this is more than 25% of the voting rights in UK 2 Ltd, Y is also a PSC in relation to UK 2 Ltd. However, he only holds his interests in UK 2 Ltd through UK 1 Ltd, which is an RLE. Y should not be included on UK 2 Ltd's PSC register. UK 1 Ltd is an RLE, since it is a UK company and it would be a PSC if it was an individual, as it holds more than 25% of the voting rights in UK 2 Ltd. UK 1 Ltd must be included on UK 2 Ltd's PSC register. This assumes that nobody exercises significant influence or control in any other way over UK 1 Ltd or UK 2 Ltd, under PSC condition 4 (refer to the statutory guidance). -10-

11 Example 2 Overseas company Y Z 60% 40% Overseas Ltd 100% UK 1 Ltd 100% UK 2 Ltd In Example 2: Overseas Ltd is an unquoted overseas company. As a non-uk company, it does not have to maintain a PSC register. Z s 40% of voting rights in Overseas Ltd does not amount to a majority stake, so Z is not regarded as indirectly holding Overseas Ltd s shares in UK 1 Ltd. Z is not a PSC in relation to UK 1 Ltd and should not be included on its PSC register. Y s 60% of voting rights in Overseas Ltd gives him a majority stake in Overseas Ltd. Overseas Ltd in turn has a majority stake in UK 1 Ltd, which has a majority stake in UK 2 Ltd. So Y indirectly holds the shares in both UK 1 Ltd and UK 2 Ltd, and is a PSC in relation to both these companies. Overseas Ltd is not an RLE so it cannot be included on the PSC register of UK 1. Y must be registered as a PSC on the register of UK 1 Ltd because he does not hold his interests in this company through an RLE. However, he only holds his interests in UK 2 Ltd through UK 1 Ltd, which is an RLE. Y should not be included on UK 2 Ltd's PSC register. UK 1 Ltd is an RLE, since it is a UK company and it would be a PSC if it was an individual, as it holds more than 25% of the voting rights in UK 2 Ltd. UK 1 Ltd must be included on UK 2 Ltd's PSC register. This assumes that nobody exercises significant influence or control in any other way over UK 1 Ltd or UK 2 Ltd, under PSC condition 4 (refer to the statutory guidance). -11-

12 Investments through English limited partnerships APPENDIX 2 PRIVATE EQUITY FUNDS The following points should be taken into account when considering whether an individual is registrable as a PSC of a UK portfolio company in which an English limited partnership invests: In the ordinary course, it is not anticipated that any individual limited partner, or any individual with an interest in a corporate limited partner, would be registrable. This is due to the exemption from PSC conditions 1, 2 and 3 applicable to limited partners, on the assumption they do not take part in the management of the limited partnership. (This exemption was included in the legislation following discussions between the BVCA and the government.) An individual limited partner may satisfy the test for "significant influence or control" over the portfolio company under PSC condition 4, or have "significant influence or control" over the limited partnership under PSC condition 5, but this is expected to be unusual. It would also be unusual for any single individual with an interest in a corporate general partner or manager to be registrable (assuming that interest does not amount to a majority stake ), but an appropriate analysis should be undertaken in each case. This should also take into account the statutory guidance on significant influence or control issued by BIS. The following points should be taken into account when considering whether a UK company or LLP (or an overseas company subject to disclosure requirements deemed equivalent) is registrable as a Relevant Legal Entity (RLE) of a UK portfolio company in which an English limited partnership invests: In the ordinary course, it is not anticipated that any corporate limited partner would be registrable on this basis. Once again, this is due to the exemption from conditions 1, 2 and 3 applicable to limited partners (on the assumption they do not take part in the management of the limited partnership). As with individual limited partners, it would also be unusual for a corporate limited partner to satisfy the test for "significant influence or control" over the portfolio company under condition 4, or to have "significant influence or control" over the limited partnership under condition 5. If the general partner is a UK company or LLP (or a listed overseas company subject to disclosure requirements deemed equivalent), it may be registrable as an RLE depending on the nature, extent and structure of the limited partnership s investment in the portfolio company. It may be registrable: o o o on the basis that it satisfies condition 1, 2, and/or 3, because it is deemed to hold the limited partnership's shares or to control its rights in the portfolio company; or on the basis that it satisfies condition 4, because it has significant influence or control over the portfolio company (for example, through the exercise of veto rights) note that this may be the case even where the limited partnership has only a relatively small stake in the portfolio company; or on the basis that it satisfies condition 5, because it has significant influence or control over the limited partnership, if the limited partnership satisfies one or more of conditions 1 to 4 in relation to the portfolio company. If the manager of the limited partnership is a UK company or LLP (or a listed overseas company subject to disclosure requirements deemed equivalent) it may also be registrable as an RLE on the basis of conditions 4 or 5. It may also be registrable on the basis of conditions 1, 2 and/or 3 if it has control over the limited partnership s rights in the portfolio company (because, for example, these rights have been delegated to the manager under the management agreement or limited partnership agreement). It would also be registrable under conditions 1, 2 and/or 3 if the UK manager has a "majority stake" in the general partner, and the general partner is not an RLE. -12-

13 When considering condition 4 in relation to the portfolio company, it will be necessary to assess whether the rights given to the limited partnership are such that the general partner or manager should be viewed as having significant influence or control over the portfolio company by virtue of being able to exercise those rights on behalf of the limited partnership. A general partner or manager that is a non-uk company or LLP (and which is not subject to disclosure requirements that have been deemed equivalent) is not capable of being an RLE and so will not be registrable on this basis. However, it will then be necessary to look further up the chain above the general partner or manager to establish if there is an RLE, or an individual who is a PSC, with a majority stake in the general partner/manager that would make them registrable in relation to the underlying portfolio company. A general partner or manager that is a UK company or LLP must maintain its own PSC register (unless it is a listed company subject to DTR 5, or it is listed on one of the other prescribed markets deemed to have an equivalent disclosure regime). Investments through limited partnerships with separate legal personality A limited partnership with separate legal personality (e.g. a Scottish limited partnership) will not itself be an RLE (although this may change for Scottish limited partnerships in the near future), but it must be looked through to see if there is an RLE (or an individual who is a PSC) with a majority stake in the limited partnership that would make them registrable in relation to an underlying UK portfolio company. The general partner of a limited partnership with legal personality is likely to have a majority stake in the limited partnership by virtue of having a deemed right of appointment as the board of the limited partnership (and, less frequently, it may also be regarded as having dominant influence or control over the limited partnership). This would give it an indirect interest in the underlying portfolio company which may need to be registered under conditions 1, 2 and/or 3. The general partner may also satisfy condition 4 in relation to a portfolio company. A similar analysis should be undertaken for the manager to establish whether it would be regarded as having a majority stake in the limited partnership that would give it an indirect interest in the underlying portfolio company which may need to be registered under conditions 1, 2 and/or 3. This will usually be the case where the manager has a majority stake in the general partner and the general partner is not an RLE (or, more unusually, if the manager is deemed to have dominant influence or control over the limited partnership). The manager may also satisfy condition 4 in relation to a portfolio company. It is also important to note that, regardless of whether or not the general partner or manager has a majority stake in the limited partnership, as with limited partnerships without legal personality, a general partner or manager that controls the limited partnership's rights in the portfolio company, may need to be registered under conditions 1, 2 and/or 3. Condition 5 is not relevant to limited partnerships that have separate legal personality. Investments through foreign limited partnerships The analysis would be the same if interests are held through a foreign limited partnership that is broadly equivalent to a limited partnership registered under the Limited Partnerships Act 1907, as foreign limited partners (whether individual or corporate) that do not participate in management (and persons with an interest in a corporate limited partner) have the benefit of the same limited partner exemption from conditions 1, 2 and 3. Conclusion In practice, few limited partnership structures are expected to generate any registrable PSCs (individuals) for their underlying UK portfolio companies (except where there is an individual with a majority stake in a general partner/manager that is not an RLE). UK onshore fund structures are likely to generate RLE -13-

14 registrations for the general partner and/or manager, but non-uk or migrated UK fund structures are only expected to generate RLEs in exceptional cases. -14-

15 Example Private equity fund IM Ltd 100% LP GP Ltd English LP 90% Overseas Ltd 100% UK Ltd In Example 3: English LP (ELP) is an English Limited Partnership without separate legal personality. It cannot be a PSC or RLE. Overseas Ltd, an unquoted overseas company, cannot be included on the register of UK Ltd, as it is not an RLE. It is necessary to look through it to establish if anyone has a majority stake in it. LP, a limited partner in a UK limited partnership (or an equivalent foreign limited partnership), who does not participate in managing the partnership, will usually be exempt from conditions 1, 2 and 3. It is important that LP does not otherwise have significant influence or control over UK Ltd, otherwise it would satisfy condition 4, or over the ELP, otherwise it would satisfy condition 5 (see the statutory guidance). GP Ltd, the general partner of ELP, if a UK company or LLP, will usually be registrable on the PSC register of UK Ltd as an RLE on the basis that it indirectly holds or controls the shares and rights Overseas Ltd holds in UK Ltd, and it therefore satisfies conditions 1, 2 and 3. This is because the majority stake ELP has in Overseas Ltd will usually be attributed to GP Ltd. GP Ltd may also be regarded as having significant influence or control over UK Ltd, satisfying condition 4, and/or over the ELP, satisfying condition 5. If GP Ltd is not an RLE it would then be necessary to investigate further up the chain of GP Ltd. IM Ltd, the manager of ELP, if a UK company or LLP, will be registrable on UK Ltd s PSC register as an RLE if it has significant influence or control over UK Ltd, satisfying condition 4, -15-

16 and/or over the ELP, satisfying condition 5. If IM Ltd (rather than GP Ltd) controls ELP s rights in Overseas Ltd it may also satisfy conditions 1, 2 and 3 on the basis that it indirectly holds or controls the shares and rights Overseas Ltd holds in UK Ltd. If GP Ltd is not an RLE, IM Ltd would be registrable on UK Ltd s register as an RLE on the basis of conditions 1, 2 and 3, because of its majority stake in GP Ltd. If IM Ltd is also not an RLE, it would then be necessary to investigate further up the chain of IM Ltd, and an individual or RLE with a majority stake in IM Ltd would need to be recorded on the PSC register of UK Ltd. GP Ltd and IM Ltd, if unquoted UK companies or LLPs, must keep their own PSC registers. IM Ltd must register any RLEs or individuals that satisfy any of the PSC conditions in relation to IM Ltd. GP Ltd would usually only have to record IM Ltd on its PSC register. -16-

17 [INDIVIDUAL/LEGAL ENTITY] [ADDRESS] APPENDIX 3 EXAMPLE INFORMATION REQUESTS & REPLIES Notice from company or LLP requesting PSC/RLE information [DATE] Dear [ADDRESSEE], Register of People with Significant Control Notice requesting disclosure under Part 21A of the UK Companies Act 2006 (the Act ) Interests in [COMPANY/LLP] (the [ Company ][ LLP ]) As you may know, changes to UK company law in force from 6 April 2016 require us to take reasonable steps to identify individuals and certain legal entities with significant control over the [Company][LLP] and to keep an up-to-date register containing the particulars prescribed by the Act. [SELECT BODY OF LETTER FROM OPTIONS A, B OR C] [OPTION A INITIAL INFORMATION REQUEST TO BE SENT TO A REGISTRABLE PSC/RLE:] [Section 790D(2) of the Act requires us to send information requests to anyone we know or have reasonable cause to believe may be a registrable person or registrable relevant legal entity, as defined in section 790C of the Act, in respect of the [Company][LLP]. We therefore require you, pursuant to section 790D of the Act, to provide us, in writing [including by to the above address], within one calendar month of the date of this notice, the following information concerning your interest (within the meaning of Part 21A of the Act), if any, in the [Company][LLP]: 1 Whether or not you are a registrable person or registrable relevant legal entity within the meaning of Part 21A of the Act; and 2 If you are such a registrable person or registrable relevant legal entity, to confirm or correct any of the particulars specified in the Appendix to this letter, and to supply any that are missing. 3 If you are not such a registrable person or registrable relevant legal entity, whether you know the identity of anyone who is such a registrable person or a legal entity, whether registrable or otherwise, within the meaning of section 790D(6) of the Act, or anyone likely to have that knowledge and, in either case, to provide any of the particulars in the Appendix that are within your knowledge and particulars that will allow the [Company][LLP] to contact such person or legal entity, stating whether or not these particulars are being supplied with the knowledge of each of the persons or legal entities concerned. You should be aware that failure to provide the information required by this notice, or to disclose false information, is an offence under paragraph 13 of Schedule 1B to the Act subject to a penalty of up to two years imprisonment, or a fine (or both). In addition, the [Company][LLP] may be obliged to take action to restrict your shares or rights until such time as you have complied with this notice or provided a valid reason sufficient to justify your failure to do so.] [OPTION B NOTICE TO SOMEONE WHO MAY HAVE INFORMATION ABOUT A REGISTRABLE PSC/RLE] [We know or have reasonable cause to believe that you may have knowledge of someone who is a registrable person or a legal entity, whether registrable or otherwise, within the meaning of section 790D(6) of the Act, in respect of the [Company][LLP]. -17-

18 We therefore require you, pursuant to section 790D(5) of the Act, to provide us, in writing [including by to the address shown above], within one calendar month of the date of this notice, the following information concerning your knowledge of interests (within the meaning of Part 21A of the Act), if any, in the [Company][LLP]: 1 Whether you know the identity of anyone who is such a registrable person or a legal entity, whether registrable or otherwise, within the meaning of section 790D(6) of the Act, and if so, to provide any of the particulars in the Appendix to this letter that are within your knowledge; or 2 Whether you know the identity of anyone likely to have that knowledge and if so, to provide any particulars that will allow that person to be contacted by the [Company][LLP]; and 3 In either case, to state whether or not these particulars are being supplied with the knowledge of each of the persons or legal entities concerned.] You should be aware that failure to provide the information required by this notice, or to disclose false information, is an offence under paragraph 13 of Schedule 1B to the Act subject to a penalty of up to two years imprisonment, or a fine (or both). [OPTION C NOTICE REQUESTING INFORMATION ABOUT CHANGED PARTICULARS FOR A REGISTRABLE PSC/RLE:] [We have reasonable cause to believe that a relevant change has occurred to the particulars stated in respect of you on the PSC register of the [Company][LLP]. We therefore require you, pursuant to section 790E of the Act, to provide us, in writing [including by to the address shown above], within one calendar month of the date of this notice, the following information concerning your interest (within the meaning of Part 21A of the Act), if any, in the [Company][LLP]: 1 Whether or not any such relevant change, as defined under section 790E(3) or (4) of the Act has occurred; 2 If so, the date of that change; and 3 To confirm or correct the particulars in the Appendix to this letter and supply any that are missing. You should be aware that failure to provide the information required by this notice, or to disclose false information, is an offence under paragraph 13 of Schedule 1B to the Act subject to a penalty of up to two years imprisonment, or a fine (or both). In addition, the [Company][LLP] may be obliged to take action to restrict your shares or rights until such time as you have complied with this notice or provided a valid reason sufficient to justify your failure to do so.] [CONCLUDE ALL LETTERS WITH THE FOLLOWING:] Guidance on your obligations under this Part of the Act can be found on the UK s government s website at Yours [sincerely / faithfully], [NAME] [Director / Company Secretary] -18-

19 Appendix Particulars required concerning registrable individuals and relevant legal entities Name Service address (individuals only) OR Registered/principal office (legal entities only) Usual residential address (individuals only) Country/state/part of UK where normally resident (individuals only) Nationality (individuals only) Date of birth (individuals only) Legal form and governing law (legal entities only) Company registry and registration number (legal entities only) Date became registrable (6 April 2016 or later) Nature of Control (see notes) Whether there has been a successful application to Companies House restricting disclosure of these particulars (individuals only) Whether information supplied with knowledge of person/legal entity YES/NO YES/NO Notes on completing the Nature of Control (state those which apply): Condition 1: the person/entity holds (directly or indirectly) more than 25% of the Company s shares (or, in the case of an LLP, the right to share in more than 25% of the LLP s surplus assets on winding up). Please state whether the person/entity holds: more than 25% up to and including 50%; OR more than 50% but less than 75%; OR 75% or more. Condition 2: the person/entity holds (directly or indirectly) more than 25% of members voting rights. Please state whether the person/entity holds: more than 25% up to and including 50%; OR more than 50% but less than 75%; OR 75% or more. Condition 3: the person/entity holds the right (directly or indirectly) to appoint or remove the majority of the Company s board (or, in the case of an LLP, the majority of persons entitled to take part in the LLP s management). Condition 4: the person/entity has the right to exercise, or actually exercise, significant influence or control over the Company or LLP. Note that if the person/entity meets one of Conditions 1-3 there is no need to say if Condition 4 is met. Condition 5: the person/entity has the right to exercise, or actually exercise, significant influence or control over the activities of a trust or partnership (that is not a legal person), where the trustees of that trust or members of that partnership would meet one of Conditions 1-4 if they were treated as an individual. Please also state which of Conditions 1-4 that the trust or partnership meets. -19-

20 Notice from individual or legal entity providing PSC/RLE information to company or LLP [The Company Secretary] [COMPANY/LLP] [ADDRESS] [ ADDRESS] [DATE] Dear Sirs, Register of People with Significant Control Part 21A of the UK Companies Act 2006 (the Act ) Interests in [COMPANY/LLP] (the [ Company ][ LLP ]) [We][I] refer to [your letter of [Date] requesting information for] the register of individuals and certain legal entities with significant control that the [Company][LLP] is required to maintain in accordance with Part 21A of the Act. [We][I] confirm that [we][i]: [SELECT FROM THE FOLLOWING IF PROVIDING INFORMATION FOR THE FIRST TIME] [IF YOU ARE REGISTRABLE:] [[are][am] a registrable [relevant legal entity][person] within the meaning of Part 21A of the Act and that [our][my] registrable particulars are as specified in the Appendix to this letter.] [OR IF YOU ARE NOT REGISTRABLE:] [[are][am] not a registrable [relevant legal entity][person] within the meaning of Part 21A of the Act; and] [AND IF YOU ARE NOT REGISTRABLE AND YOU DO NOT HAVE ANY OTHER RELEVANT INFORMATION:] [do not know the identity of anyone who is a registrable person or a legal entity, whether registrable or otherwise, within the meaning of section 790D(6) of the Act, or anyone likely to have that knowledge.] [OR IF YOU ARE NOT REGISTRABLE BUT YOU KNOW SOMEONE WHO IS REGISTRABLE:] [know the identity of a registrable person or a legal entity, whether registrable or otherwise, within the meaning of section 790D(6) of the Act and [their particulars within [our][my] knowledge are as stated in the Appendix][the particulars enabling them to be contacted are as follows: [Name/Address/ address]. These particulars are [not] being supplied with their knowledge.] [OR IF YOU ARE NOT REGISTRABLE BUT YOU KNOW SOMEONE LIKELY TO KNOW THE IDENTITY OF SOMEONE WHO IS REGISTRABLE:] [know the identity of someone likely to have knowledge of a registrable person or a legal entity, whether registrable or otherwise, within the meaning of section 790D(6) of the Act and [the particulars enabling them to be contacted are as follows: [Name/Address/ address]. These particulars are [not] being supplied with their knowledge.] [OR INSTEAD SELECT THE FOLLOWING IF UPDATING INFORMATION FOR A RELEVANT CHANGE] [[We][I] confirm that [IF YOU ARE PROVIDING UPDATED INFORMATION (E.G. YOUR ADDRESS HAS CHANGED:] -20-

21 [a relevant change within the meaning of 790E of the Act occurred on [Date] and that [[our][my] registrable particulars are now as specified in the Appendix to this letter.] [OR IF YOU ARE NO LONGER REGISTRABLE (E.G. YOU HAVE SOLD YOUR SHARES):] [[we][i] ceased to be a registrable [relevant legal entity][person] in relation to the [Company][LLP] on [Date].] [CONCLUDE ALL LETTERS WITH THE FOLLOWING:] [We][I] request that you update the PSC register of the [Company][LLP] accordingly. Yours [sincerely / faithfully], [NAME] [Director / Company Secretary] -21-

22 Appendix Particulars required concerning registrable individuals and relevant legal entities Name Service address (individuals only) OR Registered/principal office (legal entities only) Usual residential address (individuals only) Country/state/part of UK where normally resident (individuals only) Nationality (individuals only) Date of birth (individuals only) Legal form and governing law (legal entities only) Company registry and registration number (legal entities only) Date became registrable (6 April 2016 or later) Nature of Control (see notes) Whether there has been a successful application to Companies House restricting disclosure of these particulars (individuals only) Whether information supplied with knowledge of person/legal entity YES/NO YES/NO Notes on completing the Nature of Control (state those which apply): Condition 1: the person/entity holds (directly or indirectly) more than 25% of the Company s shares (or, in the case of an LLP, the right to share in more than 25% of the LLP s surplus assets on winding up). Please state whether the person/entity holds: more than 25% up to and including 50%; OR more than 50% but less than 75%; OR 75% or more. Condition 2: the person/entity holds (directly or indirectly) more than 25% of members voting rights. Please state whether the person/entity holds: more than 25% up to and including 50%; OR more than 50% but less than 75%; OR 75% or more. Condition 3: the person/entity holds the right (directly or indirectly) to appoint or remove the majority of the Company s board (or, in the case of an LLP, the majority of persons entitled to take part in the LLP s management). Condition 4: the person/entity has the right to exercise, or actually exercise, significant influence or control over the Company or LLP. Note that if the person/entity meets one of Conditions 1-3 there is no need to say if Condition 4 is met. Condition 5: the person/entity has the right to exercise, or actually exercise, significant influence or control over the activities of a trust or partnership (that is not a legal person), where the trustees of that trust or members of that partnership would meet one of Conditions 1-4 if they were treated as an individual. Please also state which of Conditions 1-4 that the trust or partnership meets. -22-