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1 Cliet Briefig March 2016 The PSC Register Requiremets: All UK icorporated compaies (that are ot exempt) ad LLPs will eed to keep a register of people with sigificat cotrol over them (PSC register) from 6 April They will also eed to file their PSC iformatio at Compaies House whe makig their cofirmatio statemet (which replaces the aual retur) from 30 Jue 2016 owards. No-compliace with the PSC register requiremets is a crimial offece. This briefig explais how to idetify the etities i your group structure that will be required to keep a PSC register ad the idividuals ad legal etities that eed to be recorded, ad what iformatio must be recorded. It also provides practical guidace to help you carry out your PSC register aalysis for each of the etities i your group structure. How to idetify compaies ad LLPs i your group structure that eed to keep a PSC register All compaies formed ad registered uder the UK Compaies Acts (apart from exempt compaies) ad all LLPs icorporated uder the Limited Liability Parterships Act 2000 eed to keep a PSC register. A compay is exempt from keepig a PSC register if the compay itself: is a issuer subject to Chapter 5 of the DTRs (DTR 5 issuer), which icludes a UK compay listed o the LSE, AIM, ISDX Mai Board or ISDX Growth Market; has votig shares admitted to tradig o a regulated market i a EEA State other tha the UK; or has votig shares admitted to tradig o certai markets i Israel, Japa, Switzerlad or the USA (see list i box). A exempt compay, such as a UK compay listed o the LSE or AIM, still eeds to cosider these ew requiremets if it has subsidiaries that are UK compaies ad/or LLPs i its group structure. It also might eed to be recorded as a relevat legal etity o a PSC register. How to idetify persos with sigificat cotrol Israel Tel Aviv Stock Exchage Japa Fukuoka Stock Exchage Nagoya Stock Exchage Osaka Securities Exchage Sapporo Securities Exchage Tokyo Stock Exchage Switzerlad BX Bere Exchage SIX Swiss Exchage Uited States of America BATS Exchage, Ic. BATS Y-Exchage, Ic. BOX Optios Exchage LLC C2 Optios Exchage, Icorporated (PSCs) ad relevat legal etities (RLEs) i relatio to a compay or LLP Oly PSCs ad RLEs ca be registered i a PSC register. Exempt compaies: list of specified markets i Israel, Japa, Switzerlad ad the USA Uited States of America Chicago Board Optios Exchage, Icorporated Chicago Stock Exchage, Ic. EDGA Exchage, Ic. EDGX Exchage, Ic. Iteratioal Securities Exchage, LLC ISE Gemii LLC Miami Iteratioal Securities Exchage LLC NASDAQ OMX BX, Ic. NASDAQ OMX PHLX LLC The NASDAQ Stock Market LLC Natioal Stock Exchage, Ic. New York Stock Exchage LLC NYSE Arca, Ic. NYSE MKT LLC

2 2 The PSC Register Requiremets: PSCs Compay coditios A PSC of a compay is a idividual who satisfies oe or more of the followig coditios i relatio to the compay: Coditio 1 holds, directly or idirectly, more tha 25% of the shares i the compay. Coditio 2 holds, directly or idirectly, more tha 25% of the votig rights i the compay. Coditio 3 holds the right, directly or idirectly, to appoit or remove a majority of the board of directors of the compay. Coditio 4 has the right to exercise, or actually exercises, sigificat ifluece or cotrol over the compay. Coditio 5 has the right to exercise, or actually exercises, sigificat ifluece or cotrol over the activities of a trust or firm that is ot a legal etity which would itself satisfy ay of coditios 1 to 4 i relatio to the compay if it were a idividual. PSCs are always idividuals. A idividual holds shares or rights idirectly if he/she holds the share or right through a chai of legal etities ad each legal etity i the chai (other tha the last) has a majority stake i the legal etity immediately below it i the chai. A majority stake is defied as holdig or cotrollig a majority of the votig rights, havig the right to appoit or remove a majority of the board of directors or otherwise havig the right to exercise, or actually exercisig, domiat ifluece or cotrol (similar to the subsidiary LLP coditios A PSC of a LLP is a idividual who satisfies oe or more of the followig coditios i relatio to the LLP: udertakig test i the Compaies Act 2006). Examples of direct ad idirect iterests are illustrated i Diagrams 1 ad 2 o page 3. RLEs Coditio 1 holds, directly or idirectly, the right to share i more tha 25% of ay surplus assets of the LLP o a widig up. Coditio 2 holds, directly or idirectly, more tha 25% of the rights to vote o those matters which are to be decided upo by a vote of the members of the LLP. Coditio 3 holds, directly or idirectly, the right to appoit or remove the majority of the persos who are etitled to take part i the maagemet of the LLP. Coditio 4 has the right to exercise, or actually exercises, sigificat ifluece or cotrol over the LLP. Coditio 5 has the right to exercise, or actually exercises, sigificat ifluece or cotrol over the activities of a trust or firm that is ot a legal etity which would itself satisfy ay of coditios 1 to 4 i relatio to the LLP if it were a idividual. The PSC register requiremets recogise that a compay or LLP may have legal etities with sigificat ifluece or cotrol over it. Such a legal etity may oly be registered i a PSC register if it is a relevat legal etity (RLE). The test for a RLE is that the legal etity: is a body corporate or firm that is a legal perso uder the law by which it is govered; AND would be a PSC over the compay or LLP if it were a idividual; AND is subject to its ow disclosure requiremets. A legal etity is subject to its ow disclosure requiremets if it: is required to keep a PSC register itself; is a DTR 5 issuer; has votig shares admitted to tradig o a regulated market i a EEA State other tha the UK; or has votig shares admitted to tradig o certai markets i Israel, Japa, Switzerlad or the USA (see list o page 1). A legal etity will ot meet the defiitio of RLE if it is ot subject to its ow disclosure requiremets, for example, ulisted overseas compaies or ulisted UK legal etities ot required to keep a PSC register (e.g. a Scottish limited partership). If a legal etity does ot meet the RLE test it caot be registered o a PSC register. However, you must look through these etities util you fid a idirect PSC or RLE or determie that there are o PSCs or RLEs. Tips for idetifyig PSCs ad RLEs You must cosider all the factual circumstaces i your aalysis. The documets that you eed to review to determie whether a PSC coditio is met by a idividual (or would be met by a legal etity if it was a idividual) are: compaies: the register of members, the articles of associatio, ay shareholders agreemet, ay other agreemet betwee shareholders ad ay rights attachig to shares; ad Clifford Chace, March 2016

3 The PSC Register Requiremets: 3 LLPs: the LLP agreemet ad ay other agreemet betwee members. If a idividual or legal etity meets oe or more of PSC coditios 1, 2 ad 3, you do ot eed to carry out ay aalysis as to whether such idividual or legal etity meets PSC coditio 4. If you eed to carry out a aalysis to determie whether PSC coditio 4 or 5 has bee met, you eed to review the statutory guidace o the meaig of sigificat ifluece or cotrol over compaies or LLPs (as applicable) published by the Departmet for Busiess, Iovatio & Skills. Whe carryig out a PSC coditio 4 aalysis, it will be importat to review ay absolute decisio rights or absolute veto rights over decisios related to the ruig of the busiess. This aalysis will be particularly relevat i the cotext of joit veture arragemets. The absolute decisio rights which, accordig to the guidace, might costitute sigificat ifluece or cotrol are very broad (ad ot based o a positive cotrol cocept or paret udertakig test) ad iclude, by way of example: establishig or amedig ay profit-sharig, bous or other icetive scheme of ay ature for directors or employees; the grat of optios uder a share optio or other share based icetive scheme; as well as fudametal decisio rights such as adoptig or amedig the busiess pla. The statutory guidace also sets out miority protectio rights that would ot o their ow costitute rights to exercise sigificat ifluece or cotrol, such as a absolute veto right over: chagig the compay s costitutio; ad makig ay additioal borrowig from leders outside previously agreed ledig thresholds. Direct iterests v Idirect iterests 1 Diagram 1 PSC UK Compay 3 UK Compay 2 35% UK Compay 1 The statutory guidace also states that where a perso is more likely tha ot to receive more tha 25% of the profits of a LLP (icludig profits allocated automatically or otherwise) this might costitute a right to exercise sigificat ifluece or cotrol. Diagram 2 PSC UK Compay C 35% UK Compay B 35% UK Compay A Diagram 1: UK Compay 1: UK Compay 2 is a direct RLE. UK Compay 3 is a idirect RLE. The PSC is a idirect PSC. UK Compay 2: UK Compay 3 is a direct RLE. The PSC is a idirect PSC. UK Compay 3: The PSC is a direct PSC. Diagram 2: UK Compay A: UK Compay B is a direct RLE. UK Compay C is NOT a idirect RLE. The PSC is NOT a idirect PSC. UK Compay B: UK Compay C is a direct RLE. The PSC is a idirect PSC. UK Compay C: The PSC is a direct PSC. 1 This does ot idicate which PSCs ad RLEs are registrable or o-registrable. Clifford Chace, March 2016

4 4 The PSC Register Requiremets: Registrable v No-registrable Diagram 1 PSC UK Compay 3 (RLE) UK Compay 2 (RLE) UK Compay 1 PSC UK Compay B (RLE) Ulisted Cayma Compay (o-rle) UK Compay A Diagram 1: UK Compay 1 PSC register aalysis: oly register UK Compay 2 as a RLE i the PSC register of UK Compay 1. UK Compay 3 is a o-registrable RLE ad the PSC is a o-registrable PSC i relatio to UK Compay 1. Diagram 2 UK Compay 2 PSC register aalysis: oly register UK Compay 3 as a RLE i the PSC register of UK Compay 2. The PSC is a o-registrable PSC i relatio to UK Compay 2. UK Compay 3 PSC register aalysis: register the PSC i the PSC register of UK Compay 3. How to determie whether a PSC or RLE is registrable or o-registrable i relatio to a compay or LLP required to keep a PSC register A PSC or RLE is o-registrable i relatio to a compay or LLP if the PSC or RLE oly holds the iterest i the compay or LLP through oe or more legal etities over each of which he/she/it has sigificat cotrol ad: the legal etity through which the iterest is held is a RLE i relatio to the compay or LLP; or at least oe of the legal etities i the chai is a RLE i relatio to the compay or LLP. 2 Please see Diagrams 1 ad 2 illustratig how this works. What eeds to be recorded o the PSC register for a registrable PSC or RLE? The PSC details to be registered are ame, date of birth, atioality, coutry or state (or part of the UK) where the PSC is usually residet, service address, usual residetial address, date o which the PSC became a registrable PSC, ature of the cotrol over the compay or LLP ad details of ay restrictios o usig or disclosig the PSC s iformatio. Diagram 2: UK Compay A PSC register aalysis: oly register UK Compay B as a RLE i the PSC register of UK Compay A. The ulisted Cayma Compay caot be a RLE as it is ot subject to its ow disclosure requiremets. The PSC is a o-registrable PSC i relatio to UK Compay A. The ulisted Cayma Compay is a overseas etity so is ot required to keep a PSC register. UK Compay B PSC register aalysis: register the PSC i the PSC register of UK Compay B. The RLE details to be registered are ame, address of its registered or pricipal office, legal form ad goverig law, register of compaies i which it is etered ad registratio umber, date o which the RLE became a registrable RLE ad ature of the cotrol over the compay or LLP. 2 The provisios of the Compaies Act 2006 that set out how to determie whether a PSC or RLE is registrable or o-registrable were recetly chaged by The Compaies Act 2006 (Amedmet of Part 21A) Regulatios Clifford Chace, March 2016

5 The PSC Register Requiremets: 5 Tips for what to record o a PSC register The PSC register must ever be empty. If you are ot i a positio to eter details i a PSC register, icludig because ivestigatios are still ogoig to determie PSCs or RLEs or PSC iformatio has ot yet bee cofirmed, the relevat fact must be etered i the PSC register. 3 If there are o PSCs or RLEs the register must record this. The Regulatios are also prescriptive as to the wordig that eeds to be recorded i relatio to the ature of the cotrol. Where PSC coditios 1 ad 2 apply (i.e. holdig more tha 25% of shares or votig rights of the compay or holdig more tha 25% of ay surplus assets of the LLP o a widig up or votig rights of the LLP) there are three optios to choose from: (i) more tha 25% but ot more tha 50%; (ii) more tha 50% but less tha 75%; ad (iii) 75% or more. The date o which a idividual or legal etity became a PSC or RLE i relatio to a compay or LLP already icorporated whe the provisios come ito effect is 6 April What does this mea for your group structure? Corporate groups with UK etities i their structures should be workig through their structures to idetify which etities are required to keep a PSC register, the carry out a aalysis to idetify registrable PSCs ad RLEs for each such etity ad obtai the relevat iformatio to complete the registers. Examples Diagram A Compay D UK plc/dtr 5 Issuer Compay C UK plc/ulisted Compay B Compay A Diagram A PSC register aalysis: Compay A PSC register aalysis: oly register Compay B as a RLE i the PSC register of Compay A. Compay B PSC register aalysis: oly register Compay C as a RLE i the PSC register of Compay B. Compay C PSC register aalysis: oly register Compay D as a RLE i the PSC register of Compay C. Compay D is a DTR 5 issuer so is ot required to keep a PSC register. Diagram B Compay D UK plc/dtr 5 Issuer Compay C 65% Compay B Cayma/Ulisted Compay A Diagram B PSC register aalysis: Compay A PSC register aalysis: oly register Compay C as a RLE i the PSC register of Compay A. Compay B is a Cayma compay so is ot required to keep a PSC register. Compay C PSC register aalysis: oly register Compay D as a RLE i the PSC register of Compay C. Compay D is a DTR 5 issuer so is ot required to keep a PSC register. 3 The draft Register of People with Sigificat Cotrol Regulatios 2016 ad the draft Limited Liability Parterships (Register of People with Sigificat Cotrol) Regulatios 2016 (Regulatios) set out the wordig that eeds to be recorded i the PSC register for the relevat factual positio. Clifford Chace, March 2016

6 6 The PSC Register Requiremets: Diagram C Diagram D P1 P2 Compay D US/NASDAQ Listed Compay C US/Ulisted Compay B Compay A Diagram C PSC register aalysis: Compay A PSC register aalysis: oly register Compay B as a RLE i the PSC register of Compay A. Compay B PSC register aalysis: oly register Compay D as a RLE i the PSC register of Compay B. Compaies C ad D are US compaies so are ot required to keep a PSC register. Further advice Compay C Cayma/Ulisted 60% Compay B Compay A Compay D Cayma/Ulisted Diagram D PSC register aalysis: Compay A PSC register aalysis: oly register Compay B as a RLE i the PSC register of Compay A. If you eed ay further iformatio or would like help carryig out your PSC register aalysis, please cotact your Clifford Chace relatioship parter. 40% Compay B PSC register aalysis: register both P1 ad P2 as PSCs i the PSC register of Compay B. Compaies C ad D are Cayma compaies so are ot required to keep a PSC register. Clifford Chace, March 2016

com Juliet McKea Professioal Support Lawyer, Corporate T: +44

7 The PSC Register Requiremets: 7 Cotacts Amy Maho Parter, Corporate T: E:amy.maho@ cliffordchace.com Juliet McKea Professioal Support Lawyer, Corporate T: E:juliet.mckea@ cliffordchace.com Clifford Chace, March 2016

8 8 The PSC Register Requiremets: Clifford Chace, 2016 Clifford Chace LLP is a limited liability partership registered i Eglad ad Wales uder umber OC Registered office: 10 Upper Bak Street, Lodo, E14 5JJ. We use the word parter to refer to a member of Clifford Chace LLP, or a employee or cosultat with equivalet stadig ad qualificatios. This publicatio does ot ecessarily deal with every importat topic or cover every aspect of the topics with which it deals. It is ot desiged to provide legal or other advice. If you do ot wish to receive further iformatio from Clifford Chace about evets or legal developmets which we believe may be of iterest to you, please either sed a to omorecotact@cliffordchace.com or cotact our database admiistrator by post at Clifford Chace LLP, 10 Upper Bak Street, Caary Wharf, Lodo E14 5JJ. Abu Dhabi Amsterdam Bagkok Barceloa Beijig Brussels Bucharest Casablaca Doha Dubai Düsseldorf Frakfurt Hog Kog Istabul Jakarta* Lodo Luxembourg Madrid Mila Moscow Muich New York Paris Perth Prague Riyadh Rome São Paulo Seoul Shaghai Sigapore Sydey Tokyo Warsaw Washigto, D.C. *Lida Widyati ad Parters i associatio with Clifford Chace. Clifford Chace has a best frieds relatioship with Redcliffe Parters i Ukraie. J

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