The new regime requiring companies to compile and keep a register of People with Significant Control (PSC) comes into force on 6 April 2016 – just less than a month away. And after 30 June 2016 organisations caught by the regime will also need to record this information at Companies House together with their next “Confirmation Statement” (which is replacing the old Annual Return).
The purpose of the new regime is to require companies to be transparent about whom the ultimate beneficial owners and controllers of the company actually are. The government’s stated intention for introducing this legislation is to help it tackle tax evasion, money laundering and terrorist financing.
Very noble aims, but aims which inadvertently may catch incorporated charities unawares. After all, registered charities are not “owned” but exist to further their purposes for the public benefit and the details of their trustees are already available to the public at the Charity Commission.
However, as being “caught” can result in criminal penalties which trustees and employees of charities as well as other “relevant legal entities” (see “who is responsible for doing it?” below) will want to stay well clear of, this is not a matter your board can afford to ignore. Your charity should start getting ready now to ensure that you are PSC-ready!
We have prepared answers to the most relevant questions which your board will need to address below.
- What do we need to do?
If you are an unincorporated charity or a CIO – nothing! This regime does not affect you at all (unless you have a trading subsidiary).
If you are a charity or social enterprise structured as a company, then you will be affected. Most will not have PSC but will still have a duty to “take reasonable steps” to find out if there are PSC who should be declared and, whether there are or not, compile and keep a PSC register and keep it updated.
In the following circumstances, however, trustees will need to ensure individuals and any relevant legal entity’s (RLE) (where the PSC is a legal entity and not an individual) details are entered in the PSC register:
• if there are fewer than four members of the charity, each of the members will be PSC;
• where a dominant trustee, chair or founder (or indeed any individual or company) regularly and consistently directs or influences decisions made by the board, that individual or entity may be a PSC; and
• a wholly-owned trading company or subsidiary charity will need to list its parent company charity as an RLE (or where the parent entity is a trust, the members and trustees of the trust).
In terms of the process, the guidance and regulations provide prescribed notices and entries to be used in the PSC register and the process which must be complied with.
For those affected organisations, the information contained in the PSC register will need to be provided to Companies House with each annual Confirmation Statement.
You should be aware that further changes will be introduced in the Fourth Money Laundering Directive, which must be implemented in the UK by June 2017.
- When do we need to do it by?
Organisations must “take reasonable steps” to determine whether any PSC exist, allow time to follow up and, if necessary serve notices on individuals who do not respond, before compiling their register by 6 April 2016 – just less than a month away.
After 30 June 2016 organisations caught by the regime will also need to record the PSC information at Companies House together with their next Confirmation Statement.
Failure to comply with the requirements of the regulations and provide accurate information on the PSC register is a criminal offence and may result in a fine or a prison sentence of up to two years.
- Who is responsible for doing it?
The company and its officers (i.e. the trustees) are ultimately responsible for investigating who the PSC are, and, whether they exist or not, keeping the register up-to-date. As mentioned above, failure to comply with the requirements of the regulations and provide accurate information on the PSC register is a criminal offence and may result in a fine or a prison sentence of up to two years.
Offences may also be committed by PSC as well as by individuals who are contacted in order to obtain information for the PSC register but do not respond.
NOTE: Governors of schools which are incorporated as companies limited by guarantee should note that they will be, except in exceptional circumstances, directors under company law and therefore subject to this new regime.
If you would like any additional information relating to this article, please do not hesitate to contact me or another member of our Independent Schools Team.