Action to prevent money laundering and boost transparency

To increase transparency, support fraud investigation and to help prevent money laundering, all private limited companies and limited liability partnerships now need to keep a register of all those who have significant control or influence over their company – a Persons with Significant Control (PSC) register.

The register, which should record both the individuals and the relevant registerable legal entities (RLE), needs to be filed at Companies House, in either the relevant PSC form, or at incorporation.

But what is a PSC or RLE? A PSC or RLE will fall under one of the following categories, as a person or legal entity which:

• holds more than 25 per cent of the shares in the company
• holds more than 25 per cent of the voting rights in the company
• as the right to appoint or remove the majority of the board of directors of the company.

If any of these points are applicable, companies must record all that apply. If none apply, the company must move on to consider whether any of the following are applicable:

• whether an individual or relevant legal entity has the right to exercise, or actually exercises, significant influence or control over the company
• where a trust or firm would satisfy one of the three conditions above if it were an individual.

But a company’s obligations under the PSC requirements do not stop at filing the register. Companies are obliged to update PSC information on Companies House within 14 days of such information changing and they must also confirm to Companies House that the information still remains accurate in the annual confirmation statement.

Although it is a further administrative burden on companies, the PSC register supports law enforcement agencies in money laundering and fraud investigation. The register also informs potential investors of a company’s ‘controllers’ before proceeding to any formal agreement.

Failure to submit the required information constitutes a criminal offence, so it is crucial that companies identify their PSCs promptly and adopt a register, which can easily be updated in the company’s statutory registers for the future.