Daniel Sutherland, partner at Fox Williams, explains what the new PSC Register means for LLPs
WITH the Panama leak shining a light on the murky world of offshore companies, the introduction on 6 April of the requirement that English companies and LLPs keep a public register of all persons with significant influence or control (PSCs) over them was particularly timely.
The guidance to the new law sets out the objectives of the new register: to increase transparency over who owns and controls UK companies and LLPs; to help inform investors when they are considering investing in a company; and to support law enforcement agencies in investigating money-laundering investigations.
Informing potential investors and helping to stop money-laundering are clearly laudable aims, but many firms may question whether transparency for its own sake is a worthwhile objective. Those who have made arrangements with a view to privacy will now find themselves swimming against the tide of both public opinion and legal requirements.
When asked, firms are likely to have a good idea of who should appear on the PSC register: after all, it is usually obvious to those within a company who is really in charge. Where advisers can add value is by looking more deeply into the structure, identifying the cases where it is not immediately clear that someone should be registered and, in many cases, how to grade that interest within the appropriate band, or helping to investigate up the chain of ownership.
The complexity of the new regime appears, so far, to be underappreciated. It is telling that the key terms ‘significant influence’ and ‘control’ are not defined in the legislation itself. It has instead been left to statutory guidance to give examples of what those critical terms might mean. Subjective judgments will need to be made and advisers will have to explain both the basis on which firms must make those judgments and the risks of getting it wrong.
Some firms will undoubtedly find surprises in their own registers. Sometimes this will be because the new rules are working as intended, revealing the truth of who ultimately controls a company or LLP. For others, it will be because some of the tests laid down are proxies for control, rather than control itself. This can make some entries onto the PSC register rather unintuitive. For example, a person with a right to more than 25% of the surplus assets of an LLP on a winding-up must appear on the register, notwithstanding that such rights are rarely linked to day-to-day control.
For both legal and reputational reasons getting the PSC register right is crucial. An annual snapshot of the register will be filed at Companies House for all to see, with the first such filings due from June this year. For those who have yet to address the new legal requirements, time is running out for doing so.
Daniel Sutherland is a partner in Fox Williams LLP’s professional practices team.
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