Updated: May 3, 2020
The 2013 G8 summit centred on achieving change in three key areas: advancing trade, ensuring tax compliance and promoting greater corporate transparency.
To improve corporate transparency, the UK established a publicly accessible register of company beneficial ownership called the People with Significant Control (PSC) register. It was implemented through the Small Business, Enterprise and Employment Act 2015 which amended the Companies Act 2006.4
The aims of the register were to make it easier for the public and Law Enforcement Organisations to ascertain who ultimately owns and controls UK companies, to promote trust amongst the businesses and provide better intelligence for criminal investigations.
UK private and public limited companies, unregistered companies, some listed companies, Societates Europaeae (SEs), limited liability partnerships (LLPs) and eligible Scottish partnerships (ESPs) are required to identify their PSCs, confirm their details, submit the information about their PSCs to the central PSC register and keep this information up to date.
PSC: A PSC is defined an individual that meets one or more of following conditions:
Directly or indirectly holds more than 25% of shares;
Directly or indirectly holds more than 25% of voting rights;
Directly or indirectly holds the right to appoint or remove the majority of the board of directors;
Otherwise has the right to exercise, or actually exercises, significant influence or control;
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.
Corporate PSC: A PSC is by definition an individual, but UK and foreign companies may be listed as a controlling entity in the Register if they are both ’relevant’ (i.e. they exercise control over a UK company, satisfying the criteria for a Relevant Legal Entity) and they are also ’registrable‘ (i.e. the first legal entity in the ownership chain). A Relevant Legal Entity must fulfil one of the criteria for exercising significant control as a PSC and either holds its own PSC register or be listed on one of the relevant stock exchanges (i.e. in the European Economic Area, Japan, Israel, Switzerland, USA).
By making the PSC register available as open data, the UK Government signalled that it recognised the importance of company transparency for tackling the global challenges of corruption, money laundering and other crimes.
In June 2017, Companies House implemented changes resulting from the EU’s fourth anti-money laundering directive which means PSC information is more up to date and that a
greater number of company types are required to provide information on their PSCs.
Over 98% of companies have provided information regarding their PSCs.
In 2018, research by Global Witness looked into more than 10 million corporate records from Companies House and finds that the real people behind thousands of companies are still going unidentified and data is not subject to sufficient scrutiny.
For most companies registering their beneficial owners – known as Persons of Significant Control (PSC) in the UK – is straightforward, with an average of 1.13 beneficial owners for each UK company.
In fact, after two years, 87% – almost 3.6 million companies – of companies are filing at least one beneficial owner. However, our analysis also reveals that thousands of companies are filing highly suspicious entries or not complying with the rules – problems we never would have found were it not for the open data nature of the register. Common methods for avoiding disclosure of a company’s real owners include filing a statement that the company has none, disclosing an ineligible foreign company as the beneficial owner, using nominees or creating circular ownership structures.
More than 335,000 companies declare they have no beneficial owner – which is allowed if no individual holds more than 25% of the shares of the company.
More than 10,000 companies declare a foreign company as their beneficial owner which is unlikely to meet the requirements – of these 72% are linked to a secrecy jurisdiction.
More than 9,000 companies are controlled by beneficial owners who control over 100 companies.
328 companies are part of circular ownership structures, where they appear to control themselves.
The research found:
345 companies have a beneficial owner who is a disqualified director
390 companies have company officers or beneficial owners who are politicians elected to national legislatures, either in the UK or in another country
7,848 companies share a beneficial owner, officer or registered postcode with a company suspected of having been involved in money laundering
More than 208,000 companies are registered at a company factory
While the vast majority of companies were complying, Global Witness analysis showed that loopholes in the rules and a lack of checks by Companies House on information submitted undermines the potential of the register to detect and deter crime. As per Companies House, a small number of companies may be deliberately providing false information, or no information at all. This could be to cover fraud or money laundering activities.
In 2019, the Department for Business, Energy, and Industrial Strategy (BEIS) carried out a post-implementation review of the PSC register regulations.
Most (77%) businesses participated in this research had submitted information around the time the PSC register was introduced or before June 2017.
More than half (56%) had checked that the information they had originally submitted was still correct.
Amongst the minority of businesses that had experienced a change to their PSCs since their initial submission, nearly all (94%) had reported this to Companies House.
Only a minority (22%) had used the PSC register to look up information about other businesses. Of these businesses two thirds found the information sourced to be useful (64%) and around a third found it to be very useful (29%).
Stakeholder organisations such as Law Enforcement Organisations, Financial Institutions and Civil Society Organisations that were interviewed reported using the PSC register in their field of work. Although most stakeholder organisations felt that the introduction of the PSC register had improved corporate transparency in the UK, many Law Enforcement Organisations and Financial Institutions thought that there was still a lot more to be done because the PSC register was thought to hold some inaccurate information.
Some Law Enforcement Organisations and Financial Institutions did not think the register had affected their work because they did not feel as though they could rely solely on the PSC register as a source of information about beneficial ownership. To improve the quality of information many stakeholders recommended that Companies House introduce validation and verification processes.