Are you Prepared for the New Rules on PSC Registers?

Business owners and employers know only too well that the 6^th of April every year always brings changes, and this year the date has not let us down.

One of the most far reaching changes this 6^th of April is the introduction of the need for the majority of UK companies and limited liability partnerships (LLPs) to start keeping a register of ‘people with significant control’.

The ‘PSC register’ as it will be known is a new statutory register which has been formulated to make sure the people that ultimately own and control a company are identified.

What Legislation is Behind the New Rules?

The rules come in on the back of the Small Enterprise and Employment Act 2015 and carry the objective of tackling money laundering, terrorist financing and tax evasion. This will be done by making public both the beneficial and legal ownership of a business.

A new part and two new schedules will be added to The Companies Act 2006 and provisions will be detailed in TheRegister of People with Significant Control Regulations 2016.

Who is Affected by the Registers?

Anyone who owns or controls over 25 per cent of a company’s shares of voting rights, or who has control in any other way over the management of a company, will need to appear on the PSC register. The register will not resemble the shareholder register, as the controlling individuals are not usually the same as the shareholders.

All UK companies will need to compile and maintain PSC registers, except publicly traded companies already subject to the disclosure requirements of DTR 5.

PSC registers are not allowed to be blank, even if the company is dormant or has no interests to register. Failure to comply will lead to criminal punishment.

What are the Key Dates to Note?

Registers must start being compiled from 6^th April 2016 and from 30^th June 2016, companies will be required to file their PSC registers with Companies House.

Once filed, the registers will be searchable online, although residential addresses will not be shown.

What Action Should I be Taking Now?

It is time to take the first step and identify who owns or controls your company indirectly and directly, and who will need to appear on the register. Check your register of members, articles of association or if applicable, your shareholders’ agreement where you should find the information you need.

If you feel you need any guidance in ensuring you are compliant with the new system and its statutory requirements, you could speak to your local bookkeepers in the first instance. They will be able to point you in the right direction concerning the compilation of your PSC register and if required, they will be able to manage the maintenance and filing of the register at Companies House.

Four Things to Consider Before Going it Alone with Self Employment

Self employment in the UK reached an all time high of 4.5 million in 2014. The benefits are many: freedom to work the hours you want; control your own earnings; take holidays when you wish; challenge yourself. But is it right for you?

If you are considering taking the plunge into working for yourself, here are four key things to think about before you do so:

Security

You will need to think about how comfortable you will be without a regular, guaranteed source of income. What would you do if you became ill or had an accident that prevented you from working? If things like this worry you, there are insurances you can take out for peace of mind that will cover you should you be unable to work in such circumstances.

Short term illnesses won’t be covered however, so if you were forced off work for a week with flu, you would need to ensure you had sufficient reserves to cover your income, as sickness pay does not exist for the self employed. Uncertainty as to where your next job will come from may also cause anxiety, as will unpaid leave such as holiday and perhaps maternity leave, so you will also need to consider how this will affect you.

Confidence

Working for yourself calls for excellent networking, negotiation and communication skills. You will need good levels of confidence in order to sell your services at a rate that you believe you are worth. You will need to possess the ability to make decisions and stand by them; you’ll need patience as well as understanding of how those you deal with need to work, and your presentation skills will need to be top notch so that prospective clients have the utmost faith in your abilities.

Research

Before you go it alone, you will need to make sure there is a market for your services. Start by searching online for others offering similar services that match your skill set. Can you match the quality of work they are showing in their portfolios? Are the rates they are charging in line with what you have in mind, and are they going to keep you afloat?

Post questions on forums or blogs to help you gauge whether there is potential for you in your chosen market, and look for industry related reports to see if there are any economic or seasonal trends you should be aware of.

Insurance

Aside from the accident and illness insurance, there are other insurances you will need to consider when going self employed.

Professional indemnity insurance will protect you should a claim be made against you for professional error, negligence or omissions. Public liability insurance will offer protection against third party property damage or bodily injury that you cause during the course of your work. If you receive business related visitors to your premises or visit clients’ premises, then this is a very important insurance to have.

Legal expenses insurance will provide you with the backing you need in the event of having to pursue a claim, for example for professional negligence or debt recovery.

If you are considering becoming self employed, an excellent first port of call for advice is your bookkeepers. They will be able to advise you on the tax and accounting related elements as well as get you set up with the right type of business structure.

Self employment can be exceptionally rewarding, but you do need to ensure it is the right thing for you. Good luck!

An Important Change to the Law on Contractual Penalties

On 4^th November 2015, judgements were made in the Supreme Court that have clarified the law on penalties in contracts. The decisions on two cases mark the first authoritative final appeal court decisions in 100 years that comprehensively address and amend the law surrounding contract penalties.

Most contracts, especially contracts of a commercial nature, feature clauses known as ‘liquidated damages’ clauses. In some cases, contract law will dictate that these clauses may amount to penalties. If this happens and a liquidated damages clause is deemed by a court to be a penalty, then it cannot be enforceable. It has therefore always been vital to make sure that clauses in contracts cannot be construed as penalties.

The Cases

In the first case, Cavendish Square Holding BV v Talal El Makdessi (The Group), the owners of The Group agreed to sell a share to Cavendish. The terms of the agreement provided that Mr Makdessi, one of the owners of The Group, was required to refrain from competing activities for several years and failure to comply would mean that he would no longer be entitled to two of the payments still due, and that he could be required to sell his remaining holding to Cavendish, for a sum ignoring any value for goodwill. The case went to trial due to Mr Makdessi having breached the restrictive covenants, however he alleged that the clauses constituted penalties and were therefore unenforceable.

The second case was ParkingEye v Beavis. ParkingEye was the manager of a retail park car park. Notices placed around the car park stated that exceeding the two hour free parking limit would lead to a charge of £85. Mr Beavis had exceed the limit by almost an hour, but refused to pay the charge, arguing that it was unenforceable and unfair under the Unfair Contract Terms in Consumer Contracts Regulations 1999.

Penalties, or not Penalties?

In both cases, however, the clauses were held to not be penalties.

Previously, the penalty rule was said to have become, in the words of Lord Sumption, “an ancient, haphazardly constructed edifice which has not weathered well”. The Supreme Court had to consider various options, including the abolition of the rule, or its extension to make it more widely applicable. Instead, it reformulated the test for a penalty, which now stands as: “Whether the impugned provision is a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation.”

It is now much clearer to work out whether a clause counts as a penalty, which should spell good news for businesses entering into contracts.