Identifying Persons of Significant Control (PSCs) can become difficult for public companies (PLCs), particularly listed PLCs which have complex shareholder structures. Sometimes the nature of share registrations can obscure the size of beneficial holdings by individuals in the organisation, and this can prevent accurate identification of registrable PSCs.
Following our articles on Persons With Significant Control and Implementing a PSC Regime, we now look specifically at Section 793 of the Companies Act 2006, which gives PLCs the right to enquire about aggregated beneficial shareholdings to help improve compliance, governance and transparency.
MSP Company Secretarial can provide advice and guidance on the identification of PSCs, information on the Section 793 exercise and consultation about creating a compliant PSC Regime. Contact our team to find out more.
Reference to a section or Part of a regulation is a reference to the Companies Act 2006 unless otherwise indicated.
“Section 793 exercise”: when a PLC can request clarification of beneficial holdings
Part 21A – Information about people with significant control – (and Schedule 1A – References to people with significant control over a company) of the Companies Act 2006 addresses the requirements for identifying and registering PSCs, however Part 22 (Information about interests in a company’s shares) gives PLCs the right to enquire about aggregated beneficial holdings which may be unclear owing to the nature of share registrations, and so disclose beneficial holdings in a company and so support a company’s interest in:
- Good corporate governance through better decision-making, directors get better insight into who may be influencing shareholder actions
- Investigate share trading patterns, including the accumulation of shares in a company, behaviours that can indicate takeover activity, activist shareholder activity, or possible concert parties
- Better transparency, taken with other regulations such as DTR disclosures, then a correct and current PSC register with its accuracy and maintenance supported by section 793 (to produce a “register of interests” – see below), as required, to ensure voting ownership and resulting influences are better understood
- Better engagement with shareholders as companies get a more detailed understanding of shareholders using nominee accounts
If you’re unsure about disclosure requirements or whether you have the right to enquire about a Person with Significant Control then please speak to MSP Company Secretarial.
Failure to disclose can be a criminal offence
Section 795 (Notice requiring information: offences) makes it a criminal offence where a person does not comply with a section 793 disclosure request (Notice by company requiring information about interests in its shares), or in responding to a section 793 request: “(i) makes a statement that he knows to be false in a material particular, or (ii) recklessly makes a statement that is false in a material particular” (s. 795(1)(b)).
Shareholders can request a section 793 exercise
It is not just the company that can initiate a section 793 exercise; section 803 allows shareholders representing at least 10% of paid-up capital with voting rights to require the company to conduct a section 793 exercise (section 804 – Duty of company to comply with requirement).
PLCs need to hold and maintain a register of interests
Following the section 793 exercise, the PLC needs then to compose and update its register of interests (section 808 – Register of interests disclosed). This register must be made available upon request as required by section 809 (Register to be kept available for inspection) and section 811 requires this register to “be open to inspection by any person without charge”.
An “interest in shares”
Section 820 to section 824 set out what is meant by an “interest in shares”. This is too detailed to be dealt with in this article, but MSP Company Secretarial is available to assist companies assess ‘interests’.
Possible consequence of a shareholder not complying with a section 793 request
It is possible that a registered shareholder who does not comply with a section 793 request will be subject to voting and transfer restrictions at a general meeting of the PLC. The application of restrictions needs to be allowed by the company’s articles, or be allowed by section 797 (Consequences of order imposing restrictions) with respect to a court order (under section 794 – Notice requiring information: order imposing restrictions on shares).
For Commercial Companies, UKLR 6.3.3R allows a company to “impose sanctions on a shareholder who is in default in complying with a notice served under section 793” where its articles permit restriction. These restrictions can address attendance and voting at a meeting and the withholding of payment of dividends.
Who can conduct a section 793 exercise?
PLCs that have reason to believe someone has an undisclosed interest in its shares can write directly to the person (or entity), however, traded companies, both as a means to ensure they have an up-to-date register of interests and to conduct analysis on share ownership, will often commission a section 793 exercise via their share registrar.
Where the company is a ‘DTR 5 Issuer’
For companies that are covered by DTR 5 (Vote Holder and Issuer Notification Rules), then additional disclosures are required by shareholders whose aggregated vote holding rights exceed 3% of a company’s total voting rights. Shareholders need to notify the company when the thresholds set out in DTR 5.1.2R are crossed (and for companies admitted to a regulated market, then a separate notification to the FCA is also required), and the company is required to make a market disclosure (via an RIS).
How can MSP Company Secretarial help?
MSP Company Secretarial provides consultancy, practical support and fractional Company Secretary services. We can help companies with advice and guidance on how to comply with the greater requirements of the PSC regime introduced by ECCTA 2023, and related disclosures for listed companies. Speak to our team to find out how we can support your governance, compliance and corporate reporting. We have experts who cover a wide range of different organisational structures including limited companies, AIM companies or UK public companies.
Section 793: Frequently Asked Questions
Is it a defence to say a Section 793 request was frivolous or vexatious?
Where a person fails to comply with a section 793 notice, then according to section 795(2), the person is not committing an offence if they can prove “that the requirement to give information was frivolous or vexatious”.
Does a Section 793 notice only cover current shareholders, or will it cover past interests too?
Whilst section 793 requests often investigate current shareholdings, s. 793(1)(b) allows the notice to enquire about “the three years immediately preceding the date on which the notice is issued”.
Section 793(3) allows the notice to ask the person “to give particulars of his own present and past interest in the company’s shares (held by him at any time during the three-year period”.
Has the implementation of PISCES regulations affected Section 793?
The requirements of s. 793 have not been changed significantly by the PISCES regulations. PISCES-traded private companies are required to include some additional disclosures which are an extension to section 793.
How does a Section 793 notice interact with DTR5 and Takeover Code obligations for AIM or listed companies?
DTR5 and Takeover Code disclosure requirements are independent of the disclosures required under s. 793. Section 793 gives investigative powers to a company, whereas DTR5 and the Takeover Code imposes duties on people to report their holdings.