BIS consults on draft rules for beneficial ownership register

Consultation has begun on draft regulations for the register of people with significant control (PSC) - widely known as those with beneficial ownership - which are expected to determine how the register will actually work in practice

Following political pressure and concerns over the opaque way in which some companies are set up, often for the purpose of aggressive tax planning, tax avoidance and in some extreme instances money laundering, the UK government sought to introduce measures to improve accountability of companies by making it easier to see who owns or controls them and who might be making the decisions about how they are run.

Legislation for the register in the Small Business, Enterprise and Employment Act 2015, introduced earlier this year in March, makes it possible for the first time to see not just who owns shares in a company but also who influences or controls a company discretely, perhaps by being able to vote on shares owned by other people. Until now these people or organisations may have been under no obligation to declare their interest.

The latest consultation from the Department for Business Innovation & Skills seeks views on draft regulations.

BIS says the rules have been designed to keep the register as simple as possible for companies to comply with, without creating unnecessary burdens, whilst also ensuring that the register operates effectively, without opening up loopholes that can be exploited.

The draft regulations cover:

  • The register’s scope – some UK companies and entities already have to make information about their ownership public and we will not require them to also provide PSC information (part 8 and 9 of the consultation paper).
  • How the nature of control is recorded on the register – by stating which of five given conditions the PSC meets and, where appropriate, indicating the extent to which the condition is met (part 10 of the consultation paper).
  • Other register entries - what a company should record in its register if it has no PSC or cannot confirm information about PSCs (part 10 of the consultation paper).
  • Fees – BIS proposes two models that can be charged by companies for sending out copies of entries in their PSC register. These are either a flat fee charged per request or a fee charged per entry requested (part 11 of the consultation paper).
  • The protection regime – people with significant control will be able to apply to have some or all of their information on the PSC registers withheld from the public register or from being shared with Credit Reference Agencies if they have reason to believe they are at serious risk of violence (part 12 of the consultation paper).
  • How a company may seek to compel others to provide information – a company may take action against any person with an interest in it, if that person or entity has not responded to a request for information. The company must first send a warning notice, followed by a restrictions notice. The draft Regulations set out the timings and content for these notices, what constitutes a valid reason for not complying, and the process for lifting restrictions (part 13 of the consultation paper).

Government plans for companies to hold their own PSC register from January 2016, and as of April 2016, they will have to give this information to Companies House when they deliver their confirmation statement (a replacement of the annual return).

This means that Companies House will have all PSC information by April 2017, which it can then make available for free in one central, searchable public register.

Baroness Neville-Rolfe DBE CMG said that the benefits from the register are not limited to the investment market.

‘The gains are not just for businesses but for anyone with an interest in ensuring that UK companies are doing the best for the investors who own them, their customers and the community they operate within.

‘And the benefits of the register are wider still. Obscure company ownership structures can facilitate tax evasion, money laundering and even terrorist financing. Clamping down on these practices is an imperative of this government.

‘By bringing in changes at the same time that allow companies to rely on Company House registers rather than having to keep their own as well, we are also eliminating a burden on business,’ said Neville-Rolfe.

Responses received will help us finalise the draft Regulations which will be laid before Parliament in the autumn.

The consultation closes on 17 July.

The consultation paper is here

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