Why you need to declare your persons with significant control

Any charity with a corporate body in its structure will soon have to comply with this element of the Business, Enterprise and Employment Act, writes Rebecca Cooney

Who are your significant persons?
Who are your significant persons?

From 6 April, all UK companies will have to keep a register of all those people who have significant control over how the organisation operates - but many charities might not realise that this regime applies to them too.

The requirement, which means each affected organisation will have to submit its register to Companies House from 30 June, was introduced in the Small Business, Enterprise and Employment Act 2015.

Under the act, a person with significant control, or PSC, is someone who directly or indirectly holds more than 25 per cent of voting rights, can appoint or remove the majority of directors or has another form of significant influence.

"There's been a tendency to think 'that's a company thing; we don't have to worry about it'," says Peter Swabey, policy and research director at the Institute of Chartered Secretaries and Administrators, the professional body for governance, which has issued guidance on the issue. "But if you're a charity with a corporate body somewhere in your structure, it will have to comply."

The requirements apply to all trading subsidiaries of charities and all charities that are companies limited by guarantee, which must disclose details such as a PSC's name, date of birth, nationality, residential address and when they became a PSC. Alternatively, they must declare it if they have no PSCs. Failure to comply could lead to a fine or even a custodial sentence.

"This is going to be pretty straightforward," Swabey says. "However, where a charity is not covered by the regime but has a trading subsidiary that is, the people compiling the information will have to do a bit of digging into the structure of the charity itself to make sure no one there is a PSC. They will also have to find out whether any board members have some indirect control because others always follow their lead, for example."

Nicola Evans, charities partner at the law firm Bircham Dyson Bell, wonders whether the regime is simply a pointless, inconsistent burden on charities.

"It's quite a normal set-up for a charitable company to have directors who are also the members of the company," she says. "So if you've got three directors, all will have more than 25 per cent of voting rights and all will be PSCs. But a charitable company with four will have no PSCs – and yet there's nothing fundamentally different about those two charities.

"All the information revealed under this regime is already available through the Charity Commission, so it's just extra bureaucracy for charities without any benefit to anybody else."

Swabey agrees that charities have been swept into a regime designed to catch money laundering in commercial companies, but says making an exception for charities might create an easily exploitable loophole for those at whom the law is aimed.

A spokeswoman for the Department for Business, Innovation and Skills says it will review the register's effectiveness and scope in 2019. In the meantime, according to both Swabey and Evans, affected charities must start identifying PSCs.

"It's a bit like the Millennium Bug," Swabey says. "Everybody needs to know about it and prepare, but it's not clear how much of a headache it will actually cause."

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