Competitor acquisitions jumping from 22% to 32% - a sign of post-pandemic opportunism?

This year’s Tak­ing Stock: Out­look for Con­sumer & Re­tail re­port looks at how the in­dustry and con­sumers have fared emer­ging from the pan­dem­ic, and how the chal­lenges of 2022 – from the war in Ukraine...

Out­line The PSC re­gime should be con­sidered in the con­text of funds and real es­tate hold­ing struc­tures wherever a rel­ev­ant UK en­tity ap­pears. Cer­tain UK re­gistered com­pan­ies, lim­ited li­ab­il­ity part­ner­ships (“LL­Ps”) and Scot­tish part­ner­ships are re­quired to identi­fy per­sons who have sig­ni­fic­ant con­trol (“PSCs”) over their in­terests and af­fairs by pub­licly dis­clos­ing and main­tain­ing their de­tails in a “PSC Re­gister”.The PSC le­gis­la­tion is in­ten­ded to pro­mote trans­par­ency with­in UK hold­ing struc­tures by mak­ing in­form­a­tion on be­ne­fi­cial own­ers pub­licly avail­able. In­di­vidu­als can meet the PSC cri­ter­ia by vir­tue of dir­ect or in­dir­ect in­terests in the un­der­ly­ing en­tity and UK com­pan­ies (and over­seas com­pan­ies that are lis­ted in the UK or on cer­tain over­seas mar­kets) may also ap­pear on the PSC Re­gister. More than one per­son or re­gis­trable leg­al en­tity may ap­pear on an en­tity’s PSC Re­gister.The PSC re­gime ana­lys­is is not al­ways straight­for­ward and there can be a num­ber of factors to take in­to con­sid­er­a­tion. Fail­ure to com­ply how­ever, car­ries crim­in­al pen­al­ties, mean­ing it is im­port­ant to get it right. Who does the PSC re­gime ap­ply to? The PSC re­gime has al­ways ap­plied to UK com­pan­ies and LL­Ps since its in­cep­tion in April 2016 but since June 2017, it has also ap­plied to Scot­tish lim­ited part­ner­ships and Scot­tish gen­er­al part­ner­ships whose part­ners are all cor­por­ate bod­ies (“Eli­gible Scot­tish Part­ner­ships”).  In gen­er­al, UK com­pan­ies sub­ject to trans­par­ency ob­lig­a­tions un­der the Fin­an­cial Con­duct Au­thor­ity's Dis­clos­ure and Trans­par­ency Rules (or their rel­ev­ant over­seas equi­val­ent) will be ex­empt from the re­quire­ments but fur­ther ana­lys­is should be un­der­taken. The rules as they ap­ply to such com­pan­ies are out­side the scope of this note.The re­quire­ment to main­tain a PSC re­gister does not cur­rently ap­ply to oth­er 'non-cor­por­ate' en­tit­ies, such as Eng­lish lim­ited part­ner­ships. What do you need to do? 1. Time peri­ods and no­ti­fic­a­tion ob­lig­a­tions An en­tity sub­ject to the PSC Re­gime has 14 days from ob­tain­ing PSC in­form­a­tion to no­ti­fy Com­pan­ies House of the in­di­vidu­al(s) that sat­is­fy the tests to qual­i­fy as a PSC.  2.    What are the con­di­tions for qual­i­fy­ing as a PSC? A PSC is an in­di­vidu­al or rel­ev­ant leg­al en­tity who meets one or more of the fol­low­ing “Con­di­tions”:holds, dir­ectly or in­dir­ectly, more than 25% of a com­pany's shares (or for LL­Ps and Eli­gible Scot­tish Part­ner­ships, more than 25% of the sur­plus as­sets on wind­ing up) (Con­di­tion 1); holds, dir­ectly or in­dir­ectly, more than 25% of vot­ing rights in the com­pany, LLP or Eli­gible Scot­tish Part­ner­ship (Con­di­tion 2); holds, dir­ectly or in­dir­ectly, the right to ap­point or re­move a ma­jor­ity of the com­pany's dir­ect­ors (or for LL­Ps and Eli­gible Scot­tish Part­ner­ships, a ma­jor­ity of those in­volved in man­age­ment) (Con­di­tion 3); has the right to ex­er­cise, or ac­tu­ally ex­er­cises, sig­ni­fic­ant in­flu­ence or con­trol over the com­pany (Con­di­tion 4); or has the right to ex­er­cise, or ac­tu­ally ex­er­cises, sig­ni­fic­ant in­flu­ence or con­trol over a trust or firm that is not a leg­al en­tity, and meets one of the con­di­tions above (Con­di­tion 5).A “firm” for the pur­poses of Con­di­tion 5 is any en­tity which does not have leg­al per­son­al­ity un­der the law by which it is gov­erned. Part­ner­ships without leg­al per­son­al­ity, in­clud­ing Eng­lish lim­ited part­ner­ships, are “firms”. LL­Ps and Eli­gible Scot­tish Part­ner­ships have leg­al per­son­al­ity and are not “firms” un­der these cri­ter­ia. i. Con­di­tions 4 and 5: “Sig­ni­fic­ant In­flu­ence or Con­trol” The mean­ing of “sig­ni­fic­ant in­flu­ence or con­trol” is im­port­ant to un­der­stand­ing the scope of the Con­di­tions. There is stat­utory guid­ance on the in­ter­pret­a­tion of the terms, which provides a num­ber of non-ex­haust­ive prin­ciples and ex­amples to help de­term­ine who falls with­in the re­gime. As the guid­ance de­tails, “sig­ni­fic­ant in­flu­ence” and “con­trol” are al­tern­at­ives. Where a per­son can dir­ect the activ­it­ies of a com­pany, trust or firm, this would be in­dic­at­ive of “con­trol”. Where a per­son can en­sure that a com­pany, trust or firm gen­er­ally ad­opts the activ­it­ies which they de­sire, this would be in­dic­at­ive of “sig­ni­fic­ant in­flu­ence”. There is no re­quire­ment for “sig­ni­fic­ant in­flu­ence” or “con­trol” to be as­ser­ted with a view to mak­ing eco­nom­ic gain and the par­tic­u­lar cir­cum­stances would al­ways need to be con­sidered. But the fol­low­ing ex­amples, if cap­able of be­ing ex­er­cised ab­so­lutely by an in­di­vidu­al, are likely to res­ult in the in­di­vidu­al meet­ing the cri­ter­ia:rights to de­term­ine the ad­op­tion/amend­ment of busi­ness plans;abil­ity to ap­point/re­move key per­sons; ap­prov­al rights over stra­tegic busi­ness de­cisions, in­clud­ing de­cisions in re­la­tion to third-party fin­an­cing. This is why the PSC Re­gime is rel­ev­ant to real es­tate and fund hold­ing struc­tures, even where eco­nom­ic own­er­ship may sug­gest oth­er­wise. For ex­ample, ana­lys­is of the PSC re­gime is likely to need care­ful con­sid­er­a­tion where in­vestors have ceded day-to-day con­trol for the af­fairs of the struc­ture to a man­ager, trust­ees or one or more of the in­vestors. Rights for minor­ity in­vestors should also be con­sidered but are un­likely to meet the cri­ter­ia when ex­er­cised with the main ob­ject­ive of pro­tect­ing cap­it­al. Here the stat­utory guid­ance refers to in­vestor pro­tec­tion rights, such as the abil­ity to veto bor­row­ing out­side of pre-ap­proved lim­its, change the con­sti­tu­tion of the en­tity and/or al­ter the nature of the ven­ture’s busi­ness as ex­amples that would not im­ply “sig­ni­fic­ant in­flu­ence” or “con­trol” when ex­er­cised in this con­text.  ii. Who must be in­cluded on the PSC Re­gister? The PSC Re­gister must in­clude:Any in­di­vidu­al who is a re­gis­trable PSC in re­la­tion to that en­tity; an­dAny rel­ev­ant leg­al en­tit­ies (“RLEs”).Rel­ev­ant Leg­al En­tit­ies or “RLEs” The fo­cus of the PSC re­gime is on in­di­vidu­als and not on leg­al en­tit­ies. But leg­al en­tit­ies that can own and con­trol com­pan­ies are cap­able of be­ing entered onto a PSC Re­gister where such en­tit­ies sat­is­fy one or more of the con­di­tions AND, in turn, are also sub­ject to dis­clos­ure re­quire­ments en­sur­ing in­form­a­tion on their be­ne­fi­cial own­er­ship is avail­able in the pub­lic do­main. In par­tic­u­lar, an RLE would be entered as a PSC be­cause:It is re­quired to keep its own PSC Re­gister; orIt has vot­ing shares ad­mit­ted to trad­ing on cer­tain reg­u­lated mar­kets (al­beit fur­ther ana­lys­is would need to be done in this re­spect).Not all RLEs are re­gis­trable on a PSC Re­gister, how­ever. An RLE is re­gis­trable in re­la­tion to an­oth­er en­tity if it is the first RLE in the own­er­ship chain. RLEs fur­ther up an own­er­ship chain do not need to be in­cluded as the in­form­a­tion on be­ne­fi­cial own­er­ship can be dis­covered by look­ing at that RLE’s re­gister. Un­lis­ted com­pan­ies re­gistered over­seas are gen­er­ally out­side the scope of the PSC re­gime and will not be cap­able of be­ing re­gistered.