PSC register—impact on lenders

PSC register—impact on lenders

New rules on keeping a register of persons with significant control (PSC) came into force on 6 April 2016. Joanna Belmonte, senior associate and professional support lawyer in the banking and finance team at Gateley Plc, considers its potential impact upon lenders.

What impact is the PSC register regime likely to have on existing loan documentation?

A person is a PSC in relation to a company (or LLP) if that person:

  • holds (directly or indirectly) more than 25% of its shares
  • holds more than 25% of the voting rights
  • has the right to appoint/remove a majority of directors or otherwise exercises significant influence or control over the company (or over a trust or firm which itself satisfies one of these requirements)

A legal entity (such as a company or LLP) will also have to be put on a company’s or LLP’s PSC register if it is a relevant legal entity (or RLE). Government guidance outlines what constitutes an RLE but broadly this will be the first legal entity in the company’s ownership chain which meets a PSC condition and which is itself subject to the PSC (or equivalent disclosure) regime.

Where loan documentation is fairly standard, the PSC regime is unlikely to have a significant effect. Government guidance lists ‘excepted roles’ which includes lenders—so being a lender to a company or LLP does not in itself amount to ‘significant influence or control’ and the lender will not be a PSC unless they are doing something out of the ordinary. While most loan documentation contains provisions regulating the business, these are usually to preserve value and shouldn’t amount to exercising significant influence or control over the company.

We suggest that if a lender is reviewing existing documentation anyway, it is worthwhile checking it from a PSC perspective. Where more stringent controls have been put in place (such as in distressed transactions) however, documentation should be reviewed sooner rather than

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About the author:

Miranda is a solicitor specialising in leveraged and acquisition finance. She trained at Hogan Lovells International LLP and qualified into the international banking and finance team. During her time at Hogan Lovells she worked on a variety of domestic and cross-border transactions, acting for both borrowers and lenders. She also experienced secondments to Barclays Bank PLC and Kaupthing Bank hf.