Small Business, Enterprise and Employment Bill (HL Bill 57)

(a) stating that the election under section 790W has been
withdrawn,

(b) recording when that withdrawal took effect, and

(c) indicating that information about people with significant
5control over the company relating to the period when the
election was in force that is no longer current is available for
public inspection on the central register.

(7) Subsections (12) and (13) of section 790M apply if a company makes
default in complying with subsection (6) as they apply if a company
10makes default in complying with that section.

790ZD Power to extend option to public companies

(1) The Secretary of State may by regulations amend this Act—

(a) to extend this Chapter (with or without modification) to
public companies or public companies of a class specified in
15the regulations, and

(b) to make such other amendments as the Secretary of State
thinks fit in consequence of that extension.

(2) Regulations under this section are subject to affirmative resolution
procedure.

CHAPTER 5 20Protection from disclosure

790ZE Protection of information as to usual residential address

(1) The provisions of sections 240 to 244 (directors’ residential
addresses: protection from disclosure) apply to information within
subsection (2) as to protected information within the meaning of
25those sections.

(2) The information within this subsection is—

(a) information as to the usual residential address of a person
with significant control over a company, and

(b) the information that such a person’s service address is his or
30her usual residential address.

(3) Subsection (1) does not apply to information relating to a person if an
application under regulations made under section 790ZF has been
granted with respect to that information and not been revoked.

790ZF Power to make regulations protecting material

(1) 35The Secretary of State may by regulations make provision requiring
the registrar and the company to refrain from using or disclosing
PSC particulars of a prescribed kind (or to refrain from doing so
except in prescribed circumstances) where an application is made to
the registrar requesting them to refrain from so doing.

(2) 40“PSC particulars” are particulars of a person with significant control
over the company—

(a) including a person who used to be such a person, but

(b) excluding any person in relation to which this Part has effect
by virtue of section 790C(12) as if the person were an
individual.

(3) Regulations under this section may make provision as to—

(a) 5who may make an application,

(b) the grounds on which an application may be made,

(c) the information to be included in and documents to
accompany an application,

(d) how an application is to be determined,

(e) 10where an application is granted, the duration of and
procedures for revoking the restrictions on use and
disclosure, and

(f) the charging of fees by the registrar for disclosing PSC
particulars where the regulations permit disclosure, by way
15of exception, in prescribed circumstances.

(4) Provision under subsection (3)(d) and (e) may in particular—

(a) confer a discretion on the registrar;

(b) provide for a question to be referred to a person other than
the registrar for the purposes of determining the application
20or revoking the restrictions.

(5) Regulations under this section are subject to affirmative resolution
procedure.

(6) Nothing in this section or in regulations made under it affects the use
or disclosure of particulars of a person in any other capacity (for
25example, the use or disclosure of particulars of a person in that
person’s capacity as a member or director of the company).”

2 After Schedule 1 to that Act insert—

Section 790C

“Schedule 1A References to people with significant control over a company

Part 1 30The specified conditions

Introduction

1 This Part of this Schedule specifies the conditions at least one of
which must be met by an individual (“X”) in relation to a company
(“company Y”) in order for the individual to be a person with
35“significant control” over the company.

Ownership of shares

2 The first condition is that X holds, directly or indirectly, more than
25% of the shares in company Y.

Ownership of voting rights

3 The second condition is that X holds, directly or indirectly, more
than 25% of the voting rights in company Y.

Ownership of right to appoint or remove directors

4 5The third condition is that X holds the right, directly or indirectly,
to appoint or remove a majority of the board of directors of
company Y.

Significant influence or control

5 The fourth condition is that X has the right to exercise, or actually
10exercises, significant influence or control over company Y.

Trusts, partnerships etc

6 The fifth condition is that—

(a) the trustees of a trust or the members of a firm that, under
the law by which it is governed, is not a legal person meet
15any of the other specified conditions (in their capacity as
such) in relation to company Y, or would do so if they were
individuals, and

(b) X has the right to exercise, or actually exercises, significant
influence or control over the activities of that trust or firm.

20Part 2 Holding an interest in a company etc

Introduction

7 This Part of this Schedule specifies the circumstances in which, for
the purposes of section 790C(4) or (8)—

(a) 25a person (“V”) is to be regarded as holding an interest in a
company (“company W”);

(b) an interest held by V in company W is to be regarded as
held through a legal entity.

Holding an interest

8 (1) 30V holds an interest in company W if—

(a) V holds shares in company W, directly or indirectly,

(b) V holds, directly or indirectly, voting rights in company W,

(c) V holds, directly or indirectly, the right to appoint or
remove any member of the board of directors of company
35W,

(d) V has the right to exercise, or actually exercises, significant
influence or control over company W, or

(e) sub-paragraph (2) is satisfied.

(2) This sub-paragraph is satisfied where—

(a) the trustees of a trust or the members of a firm that, under
the law by which it is governed, is not a legal person hold
an interest in company W in a way mentioned in sub-
paragraph (1)(a) to (d), and

(b) 5V has the right to exercise, or actually exercises, significant
influence or control over the activities of that trust or firm.

Interests held through a legal entity

9 (1) This paragraph applies where V—

(a) holds an interest in company W by virtue of indirectly
10holding shares or a right, and

(b) does so by virtue of having a majority stake (see paragraph
18) in—

(i) a legal entity (“L”) which holds the shares or right
directly, or

(ii) 15a legal entity that is part of a chain of legal entities
such as is described in paragraph 18(1)(b) or (2)(b)
that includes L.

(2) Where this paragraph applies, V holds the interest in company
W—

(a) 20through L, and

(b) through each other legal entity in the chain mentioned in
sub-paragraph (1)(b)(ii).

Part 3 Supplementary provision

25Introduction

10 This Part sets out rules for the interpretation of this Schedule.

Joint interests

11 If two or more persons each hold a share or right jointly, each of
them is treated for the purposes of this Schedule as holding that
30share or right.

Joint arrangements

12 (1) If shares or rights held by a person and shares or rights held by
another person are the subject of a joint arrangement between
those persons, each of them is treated for the purposes of this
35Schedule as holding the combined shares or rights of both of them.

(2) A “joint arrangement” is an arrangement between the holders of
shares (or rights) that they will exercise all or substantially all the
rights conferred by their respective shares (or rights) jointly in a
way that is pre-determined by the arrangement.

(3) 40“Arrangement” has the meaning given by paragraph 21.

Calculating shareholdings

13 (1) In relation to a legal entity that has a share capital, a reference to
holding “more than 25% of the shares” in that entity is to holding
shares comprised in the issued share capital of that entity of a
5nominal value exceeding (in aggregate) 25% of that share capital.

(2) In relation to a legal entity that does not have a share capital—

(a) a reference to holding shares in that entity is to holding a
right to share in the capital or, as the case may be, profits of
that entity;

(b) 10a reference to holding “more than 25% of the shares” in that
entity is to holding a right or rights to share in more than
25% of the capital or, as the case may be, profits of that
entity.

Voting rights

14 (1) 15A reference to the voting rights in a legal entity is to the rights
conferred on shareholders in respect of their shares (or, in the case
of an entity not having a share capital, on members) to vote at
general meetings of the entity on all or substantially all matters.

(2) In relation to a legal entity that does not have general meetings at
20which matters are decided by the exercise of voting rights—

(a) a reference to exercising voting rights in the entity is to be
read as a reference to exercising rights in relation to the
entity that are equivalent to those of a person entitled to
exercise voting rights in a company;

(b) 25a reference to exercising more than 25% of the voting rights
in the entity is to be read as a reference to exercising the
right under the constitution of the entity to block changes
to the overall policy of the entity or to the terms of its
constitution.

15 30In applying this Schedule, the voting rights in a legal entity are to
be reduced by any rights held by the entity itself.

Rights to appoint or remove members of the board

16 A reference to the right to appoint or remove a majority of the
board of directors of a legal entity is to the right to appoint or
35remove directors holding a majority of the voting rights at
meetings of the board on all or substantially all matters.

17 References to a board of directors, in the case of an entity that does
not have such a board, are to be read as references to the
equivalent management body of that entity.

40Shares or rights held “indirectly”

18 (1) A person holds a share “indirectly” if the person has a majority
stake in a legal entity and that entity—

(a) holds the share in question, or

(b) is part of a chain of legal entities—

(i) each of which (other than the last) has a majority
stake in the entity immediately below it in the
chain, and

(ii) the last of which holds the share.

(2) 5A person holds a right “indirectly” if the person has a majority
stake in a legal entity and that entity—

(a) holds that right, or

(b) is part of a chain of legal entities—

(i) each of which (other than the last) has a majority
10stake in the entity immediately below it in the
chain, and

(ii) the last of which holds that right.

(3) For these purposes, A has a “majority stake” in B if—

(a) A holds a majority of the voting rights in B,

(b) 15A is a member of B and has the right to appoint or remove
a majority of the board of directors of B,

(c) A is a member of B and controls alone, pursuant to an
agreement with other shareholders or members, a majority
of the voting rights in B, or

(d) 20A has the right to exercise, or actually exercises, dominant
influence or control over B.

(4) In the application of this paragraph to the right to appoint or
remove a majority of the board of directors, a legal entity is to be
treated as having the right to appoint a director if—

(a) 25a person’s appointment as director follows necessarily
from that person’s appointment as director of the legal
entity, or

(b) the directorship is held by the legal entity itself.

Shares held by nominees

19 30A share held by a person as nominee for another is to be treated
for the purposes of this Schedule as held by the other (and not by
the nominee).

Rights treated as held by person who controls their exercise

20 (1) Where a person controls a right, the right is to be treated for the
35purposes of this Schedule as held by that person (and not by the
person who in fact holds the right, unless that person also controls
it).

(2) A person “controls” a right if, by virtue of any arrangement
between that person and others, the right is exercisable only—

(a) 40by that person,

(b) in accordance with that person’s directions or instructions,
or

(c) with that person’s consent or concurrence.

21 (1) “Arrangement” includes—

(a) any scheme, agreement or understanding, whether or not
it is legally enforceable, and

(b) any convention, custom or practice of any kind.

(2) But something does not count as an arrangement unless there is at
5least some degree of stability about it (whether by its nature or
terms, the time it has been in existence or otherwise).

Rights exercisable only in certain circumstances etc

22 (1) Rights that are exercisable only in certain circumstances are to be
taken into account only—

(a) 10when the circumstances have arisen, and for so long as
they continue to obtain, or

(b) when the circumstances are within the control of the
person having the rights.

(2) But rights that are exercisable by an administrator or by creditors
15while a legal entity is in relevant insolvency proceedings are not to
be taken into account even while the entity is in those proceedings.

(3) “Relevant insolvency proceedings” means—

(a) administration within the meaning of the Insolvency Act
1986,

(b) 20administration within the meaning of the Insolvency
(Northern Ireland) Order 1989, or

(c) proceedings under the insolvency law of another country
or territory during which an entity’s assets and affairs are
subject to the control or supervision of a third party or
25creditor.

(4) Rights that are normally exercisable but are temporarily incapable
of exercise are to continue to be taken into account.

Rights attached to shares held by way of security

23 Rights attached to shares held by way of security provided by a
30person are to be treated for the purposes of this Schedule as held
by that person—

(a) where apart from the right to exercise them for the purpose
of preserving the value of the security, or of realising it, the
rights are exercisable only in accordance with that person’s
35instructions, and

(b) where the shares are held in connection with the granting
of loans as part of normal business activities and apart
from the right to exercise them for the purpose of
preserving the value of the security, or of realising it, the
40rights are exercisable only in that person’s interests.

Significant influence or control

24 (1) The Secretary of State must prepare and publish guidance about
the meaning of “significant influence or control” for the purposes
of this Schedule.

(2) The guidance must be laid before Parliament.

(3) Regard must be had to that guidance (or, if it has been updated, to
the latest guidance) in interpreting references in this Schedule to
“significant influence or control”.

5Limited partnerships

25 (1) An individual does not meet the specified condition in paragraph
2, 3 or 4 in relation to a company by virtue only of being a limited
partner.

(2) An individual does not meet the specified condition in paragraph
102, 3 or 4 in relation to a company by virtue only of, directly or
indirectly—

(a) holding shares, or

(b) holding a right,

in or in relation to a limited partner which (in its capacity as such)
15would meet the condition if it were an individual.

(3) Sub-paragraphs (1) and (2) do not apply for the purposes of
determining whether the requirement set out in paragraph (a) of
the specified condition in paragraph 6 is met.

(4) In this paragraph “limited partner” means a limited partner in a
20limited partnership registered under the Limited Partnerships Act
1907 (other than one who takes part in the management of the
partnership business).

Part 4 Power to amend thresholds etc

26 (1) 25The Secretary of State may by regulations amend this Schedule for
a permitted purpose.

(2) The permitted purposes are—

(a) to replace any or all references in this Schedule to a
percentage figure with references to some other (larger or
30smaller) percentage figure;

(b) to change or supplement the specified conditions in Part 1
of this Schedule so as to include circumstances (for
example, circumstances involving more complex
structures) that give individuals a level of control over
35company Y broadly similar to the level of control given by
the other specified conditions.

(3) Regulations under this paragraph are subject to affirmative
resolution procedure.

Section 790I

Schedule 1A Enforcement of disclosure requirements

40Right to issue restrictions notice

1 (1) This paragraph applies if—

(a) a notice under section 790D or 790E is served by a
company on a person who has a relevant interest in the
company, and

(b) the person fails to comply with that notice within the time
5specified in it.

(2) The company may give the person a notice under this paragraph
(a “warning notice”) informing the person that it is proposing to
issue the person with a notice (a “restrictions notice”) with respect
to the relevant interest.

(3) 10The company may issue the restrictions notice if, by the end of the
period of one month beginning with the date on which the
warning notice was given—

(a) the person has not complied with the notice served under
section 790D or 790E, and

(b) 15the company has not been provided with a valid reason
sufficient to justify the person’s failure to comply with the
notice served under that section.

(4) A restrictions notice is issued on a person by sending the notice to
the person.

(5) 20The effect of a restrictions notice is set out in paragraph 3.

(6) In deciding whether to issue a restrictions notice, the company
must have regard to the effect of the notice on the rights of third
parties in respect of the relevant interest.

Relevant interests

2 (1) 25For the purposes of this Schedule, a person has a relevant interest
in a company if the person—

(a) holds any shares in the company,

(b) holds any voting rights in the company, or

(c) holds the right to appoint or remove any member of the
30board of directors of the company.

(2) References to “the relevant interest” are to the shares or right in
question.

(3) Part 3 of Schedule 1A applies for the interpretation of sub-
paragraph (1) save that, where the relevant interest is by virtue of
35paragraph 19 or 20 of that Schedule, treated for the purposes of
that Schedule as held by a person other than the person who in fact
holds the interest, both the holder and the other person are to be
regarded for the purposes of this Schedule as having the relevant
interest.

40Effect of restrictions notice

3 (1) The effect of a restrictions notice issued under paragraph 1 with
respect to a relevant interest is as follows—

(a) any transfer of the interest is void,

(b) no rights are exercisable in respect of the interest,

(c) no shares may be issued in right of the interest or in
pursuance of an offer made to the interest-holder,

(d) except in a liquidation, no payment may be made of sums
due from the company in respect of the interest, whether
5in respect of capital or otherwise.

(2) An agreement to transfer an interest that is subject to the
restriction in sub-paragraph (1)(a) is void.

(3) Sub-paragraph (2) does not apply to an agreement to transfer the
interest on the making of an order under paragraph 8 made by
10virtue of sub-paragraph (3)(b) of that paragraph (removal of
restrictions in case of court-approved transfer).

(4) An agreement to transfer any associated right (otherwise than in a
liquidation) is void.

(5) Sub-paragraph (4) does not apply to an agreement to transfer any
15such right on the making of an order under paragraph 8 made by
virtue of sub-paragraph (3)(b) of that paragraph (removal of
restrictions in case of court-approved transfer).

(6) An “associated right”, in relation to a relevant interest, is—

(a) a right to be issued with any shares issued in right of the
20relevant interest, or

(b) a right to receive payment of any sums due from the
company in respect of the relevant interest.

(7) The provisions of this section are subject to any directions given
under paragraph 4.

25Protection of third party rights

4 (1) The court may give a direction under this paragraph if, on
application by any person aggrieved, the court is satisfied that a
restrictions notice issued by the company under paragraph 1
unfairly affects the rights of third parties in respect of the relevant
30interest.

(2) The direction is given for the purpose of protecting those third
party rights.

(3) The direction is a direction that certain acts will not constitute a
breach of the restrictions placed on the relevant interest by the
35restrictions notice.

(4) An order containing a direction under this paragraph—

(a) must specify the acts that will not constitute a breach of the
restrictions, and

(b) may confine the direction to cases where those acts are
40done by persons, or for purposes, described in the order.

(5) The direction may be given subject to such terms as the court
thinks fit.