Extension of PSC register: what do funds with Scottish LPs in their structure need to know?

Scottish limited partnerships (Scottish LPs) are now within scope of the persons with significant control (PSC) register regime, as a result of changes which came into force on 26 June 2017.  Changes to the PSC register regime have been expected for some time.  But the details of how they would apply to Scottish LPs were only published this week.

What is the PSC register regime?

The PSC register has been in force for UK companies and limited liability partnerships (LLPs) since 6 April 2016.  But there are some differences between the existing regime and the regime as it applies to Scottish LPs.  Here is a summary of the Scottish LP regime:

• The PSC register is a record of the significant controllers of an entity. Scottish LPs have to gather information about their PSCs and notify that information to Companies House.  Unlike companies and LLPs, they do not have to maintain a separate PSC register themselves.
• An individual will be registrable as a PSC of a Scottish LP if they ultimately hold the right to more than 25% of any surplus assets, hold more than 25% of the voting rights, hold the right to appoint or remove a majority of management or otherwise exercise significant influence or control. There is statutory guidance on what amounts to “significant influence or control”: someone with the right to more than 25% of the profits will meet this criteria.    The test for Scottish LPs is very similar to the test which applies to LLPs.
• If significant control is exercised through another entity which itself has to keep a PSC register or which is listed on certain stock exchanges, details about that entity must be registered instead of the individual’s details. That way the same information does not have to be recorded on multiple registers but significant control can be tracked through chains of entities. However, if an individual exercises control through non-UK or unlisted entities (i..e outside the PSC regime), you must look through those entities to find the individuals who are ultimately in control.
• The Companies House record is public and free to search online (residential addresses and day of birth are kept confidential).
• Scottish LPs are obliged to take reasonable steps to identify people with significant control and those people are in turn obliged to provide the information to the Scottish LP. Failure to comply is a criminal offence which on conviction could lead to fines and/or imprisonment of up to two years.
• Scottish LP can impose a “restrictions notice” on a person’s interest if they fail to provide requested information. An interest which has had a restrictions notice applied to it cannot be transferred, cannot exercise any rights (e.g. voting rights), and cannot have any payment made in respect of it (e.g. capital payments).
• If there are no PSCs or PSC information cannot be obtained, there are prescribed statutory statements that must be filed at Companies House whilst the Scottish LP is carrying out its investigation, or if there is no one with significant control.

For further information on the PSC register, see our insights pages here.

How will this apply to funds with Scottish LPs in their structure?

For Scottish LPs which are used in typical UK fund structures, we expect that the general partner, the manager (if there is one) and any limited partner who is entitled to more than 25% of the surplus assets or profits will qualify as PSCs.

Existing Scottish LPs will need to gather PSC information about these entities and notify Companies House on the appropriate forms (yet to be published).  The first filing effectively has to be made by 7 August 2017.  This filing will set out the PSC information (if known at that stage) or will be a filing of the relevant statutory statement (e.g. that the Scottish LP is still undertaking investigations or has no PSCs).

Scottish LPs incorporated on or after 24 July will have to provide their PSC information on incorporation.

Subsequent changes to PSC information will need to be filed at Companies House within 14 days of the change being notified to the Scottish LP so changes to PSC information will need to be factored into subsequent closings.

Osborne Clarke comment

The late publication of the legislation is less than satisfactory leaving existing Scottish LPs very little time to get up to speed and ensure they comply by the tight deadline.  But similarities with the existing regime should make it easier for funds which are already required to gather PSC information for other entities in their fund structures.