Get ready for PSC – NHS bodies that own companies take note!

From 6 April 2016 all UK companies are required to maintain a register of people who exercise significant control over the entity (PSCs) and must also include in the register details of registrable relevant legal entities (RLEs).

These rules affect all companies that are wholly or partly owned by NHS bodies because every company must have a register even if it has no PSCs or RLEs and failure to have one is a criminal offence. These rules, which are aimed at increasing transparency and reducing crime, apply as much to dormant entities as to active ones. The rules also apply to limited liability partnerships and societates europaeae.

In relation to a company limited by shares, a PSC is someone who satisfies one or more of the following tests (and an RLE is broadly an entity that would be a PSC if it was an individual):

i. Directly or indirectly holds more than 25 per cent of the shares

ii. Directly or indirectly holds more than 25 per cent of the voting rights

iii. Directly or indirectly holds the right to appoint or remove a majority of directors

iv. Otherwise has the right to exercise, or actually exercises, significant influence or control

v. Has the right to exercise, or actually exercises, significant influence or control over the activities of a trust or firm which is not a legal entity, but would itself satisfy any of the first four conditions if it were an individual.

The information collected by companies will need to be included on annual returns (to be renamed “confirmation statements”) from June 2016. The information filed with Companies House (other than the home address of the PSC) will be public, although it will be possible for PSCs to apply to be excluded from the public register where they have a legitimate reason to do so (for example, that they may be targeted by activists).

The technical definition of RLEs means that most NHS bodies will not need to appear on the PSC registers of companies in which they have an interest, but this does not mean that they can ignore the regime for the following reasons:

1. As noted above, even where there is no PSC or RLE, a register must still be maintained. In this case the register would make the positive statement that no one needs to be entered into it.
2. Although an NHS Trust, for example, may not be an RLE, it does not mean that other shareholders should not appear as PSCs or RLEs, even where the NHS Trust is the dominant party. If the individuals or entities satisfy the criteria to be PSCs or RLEs they must appear on the register even if the NHS Trust (in this example) does not have to appear on it.
3. The criteria for being an RLE or a PSC go beyond mere ownership and include whether individuals or relevant legal entities have the right to appoint management or actually exercise control. Thus it may be the case that an individual who exercises the NHS Trust’s control rights over a company (to continue the example from the preceding paragraph) will need to be registered as a PSC even though the NHS Trust on whose behalf they are exercised does not.
4. Failure to comply may lead to fines and/or imprisonment.

BIS has the responsibility of publishing statutory guidance on the PSC regime, which is here.

If you are in any doubt how to proceed, please contact the writer or your usual contact at Mills & Reeve.