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Transparency and membership - Coggle Diagram
Transparency and membership
It is important to be able to identify who controls a company in order to hold companies and those who control them to account
The register of members might not reveal the true identity of the person who controls the shares
Due to the distinction between legal ownership and beneficial ownership, the register of members may not provide an accurate account of who actually controls the shares
The use of nominees can be completely legitimate but concerns have existed that nominees could use a company to engage in unlawful activity while concealing their identity from regulators
There are 2 methods by which company law seeks to make corporate control more transparent
Register of interests disclosed
PSC register
Register of interests disclosed
Under s.793, notice can be issued requiring the beneficial owner to confirm whether it has an interest in the company's shares and if it does have an interest, to provide further information regarding that interest
An interest In shares is defined widely and includes an interest of any kind whatsoever in the shares
If the company refused to issue a s.793 notice, then the members holding at least 10% of the company's paid up capital can require the company to issue a s.793 notice
There are restrictions on the use of s.793
Can only be used by a public company
A public company can only issue a s.793 notice if it knows or has reasonable cause to believe that a person is interested in its shares, or if a person has been so interested in the previous 3 years
A person who fails to comply with a s.793 notice or who provides false information when complying with a s.793 notice, commits a criminal offence
The company must keep a register of any information disclosed to it under s.793
Failure to keep this register is a criminal offence
Any information received under s.793 must be entered into this register within 3 days and must be kept on the register for at least 6 years
Any person can inspect the register free of charge
PSC register
The major weakness of a s.793 notice is that it can only be used by a company if it knows or has reasonable cause to believe that person is interested in its shares
Many companies will lack such knowledge and so the register of interests disclosed may not pride full information on all persons who have an interest in the company's shares especially the beneficial owners
Part 21A of CA2006 requires companies to maintain a register of persons with significant control
Any company to which part 21A applies must kept a PSC register although private company may elect to keep their PSC information on the central register of CH
Part 21A applies to all companies but
Companies subject to chapter 5 of the DTR
Companies excluded from part 21A by regulations
Companies subject to Part 21A must take reasonable steps to find out if there is a registrable person in the company and if so to identify them
Registrabale persons are also under a duty to notify the company if they are registrable
A person will have a significant control if any one of the following conditions are satsified
A person holds directly or indirectly more than 25% of the company's shares
A person hold, directly or indirectly, more than 25% of the company's voting rights
A person hold the right, directly or indirectly, to appoint or remove a majority of the company directors
A person has the right to exercise or actually exercises significant influence or control over the company
The trustees of a trust or the members of the firm that is not a legal person meet any of the conditions or would do so if they were individuals and they have the right to exercise significant influence over the activities of that trust or firm
Information on register
Name
Address
Country of residence
Nationality
Date the person become a PSC
Nature of control over the company
Termination of membership
The member dies
The member transfers, transmits or gifts his shares to another person
The members shares are forfeited or surrendered
Where the contract to sell shares to the member is rescinded or declared void
Where an event occurs that under the articles, will cause the member to cease being a member
The member is declared bankrupt and his shares are registered in the name of his trustee in bankruptcy