People with significant control – what’s the position for nominee shareholders of UK companies?
Owners of shares in UK companies may no longer be able to shelter behind nominee shareholders due to the People with Significant Control (PSC) reporting rules.
Increasing the transparency of the ownership and control of UK companies is the purpose of the People with Significant Control (PSC) legislation introduced last April. As a result, and depending upon the size of the shareholding, owners of shares in UK companies may no longer be able to shelter behind nominee shareholders.
Until March 2016, a nominee shareholder protected the identity of the beneficiary of the shareholding (i.e. the actual owner) and was an individual, company or LLP that held shares on behalf of the actual owner. In the context of a company, a nominee shareholder is named publicly as the holder of the shares but is accountable to the actual owner of the shares, who remains anonymous. Generally, the relationship between the nominee shareholder and the actual owner is governed by a Declaration of Trust (or other confidential nominee agreement) which establishes that it is the actual owner who owns the shares, not the nominee.
Today, any PSC of a company or LLP must have their details included on a public register to provide greater transparency regarding ownership. As a result, a number of new conditions have been incorporated into the Companies Act 2006, the main one being that a company or LLP must provide a statement detailing which persons hold, directly or indirectly, more than 25% but not more than 50% of the shares in the company.
The Department for Business Innovation and Skills (BIS) has published non-statutory guidance which gives examples of the types of relationships and roles that a person can have with a company, and that may imply that such a person is deemed to have significant influence or control over that company. A summary of this guidance is available here.
BIS indicates that if shares or rights in a company are held by a nominee, the company should treat them as if they were held by the person for whom the nominee is acting.
Importantly, companies have a duty to take reasonable steps to find out if there are any registrable members and individual shareholders are required to disclose their interest if they should be named on the PSC Register. Lindsays previous article on PSC can be read here.