New "persons with significant control" (PSC) requirements, which come in to effect on 6 April 2016, have placed the spotlight on corporate governance for pensions trustee companies. This article looks at the PSC requirements and considers some of the other company law duties that directors of trustee companies need to think about.

On 6 April 2016, most unlisted UK companies (including pension trustee companies) will need to:

  • take reasonable steps to find out if there is a person with "significant influence or control" over them; and
  • create and maintain a register of those persons.

Trustee directors should speak to their employer's company secretary to confirm: whether this issue is being looked at for group companies; and that the required register has been created and will be maintained.

What should be on the agenda for pension trustee companies?

Compliance with company law is an additional requirement for trustee companies compared with boards of individual trustees. Over the past few years there have been a series of changes which place new duties on companies. These include:

  • PSC requirements
  • Indemnities
  • Companies House filings
  • Authorising conflicts of interest
  • Appointment and replacement of trustee directors

PSC requirements and pension trustee companies

From 6 April 2016, UK pension trustee companies will have to:

  • take reasonable steps to find out if there is a person or persons with "significant influence or control" over them;
  • determine if there is a "relevant legal entity" (RLE) with significant influence or control over them. These are typically legal entities that would have been a PSC if they were an individual. To be an RLE, a company has to be subject to its own disclosure requirements (i.e. under the PSC regime or under a relevant listing regime); and
  • create and maintain a register of those persons and entities.

Our company law team have produced a comprehensive guide to the PSC requirements. Please ask your usual contact in the pensions team, who will be happy to send you a copy of this guide.

From 30 June 2016, UK pension trustee companies will need to provide this information to Companies House as part of the annual "Confirmation Statement". The Confirmation Statement will replace the Annual Return from 30 June 2016 onwards.

The information will be made publically available through Companies House's online and open-access company information service.

Directors of pension trustee companies should take immediate action to:

  • confirm that whoever handles statutory books and filings is aware of the new obligations (including the date for providing the information to Companies House);
  • ensure that a register is put in place with effect from 6 April 2016; and
  • put in place or agree a process for the keeping, updating and filing of the register.

For most trustee companies, the process of identifying PSCs and RLEs should be relatively straightforward.

Trustee company limited by shares

  • The Trustees will need to look at who owns the shares in the trustee company and consider if these are PSCs or RLEs.
  • Trustees may need to consider if there are any individuals who are not directors or shareholders but who regulary influence the decisions reached by a majority of the board.
  • In any cases that are not straightforward, trustee directors should seek legal advice.

Trustee company limited by guarantee

  • The PSC or RLE may be more difficult to identify in a trustee company limited by guarantee.
  • Trustee directors will need to review the company's governing documents to determine who or which entity actually has the control of the company.
  • In any cases that are not straightforward, trustee directors should seek legal advice.

Failure to seek or provide relevant information is technically punishable by a maximum of up to two years in prison.

Next steps

Trustee directors should speak to their employer's company secretary and confirm:

  • whether this issue is being looked at for the employer's companies;
  • that the required PSC register has been created and will be maintained; and
  • if they can provide an annual confirmation

The PSC register needs to be in place on 6 April 2016.

Other company law issues for trustee directors to consider

Compliance with the new PSC requirements is the current priority for directors of trustee companies. It might be a useful point to consider compliance with other company law duties.

Indemnities

  • Under the Companies Act 2006, most provisions to exclude the liability of directors for negligence, default, breach of duty or breach of trust) are void.
  • Directors of pension trustee companies may, however, be indemnified under 'qualifying pension scheme indemnity' provisions.
  • Qualifying pension scheme indemnities must be disclosed in the annual directors' report (if this is required).
  • Qualifying pension scheme indemnities must not cover liability for criminal fines or regulatory penalties, or the cost of defending criminal proceedings where the director is convicted.

Annual filings with Companies House and The Pensions Regulator

  • Trustee companies are required to file an annual return with Companies House. From 30 June 2016 this will be known as a Confirmation Statement.
  • You can be fined up to £5,000 and your company struck off if you don't send Companies House your annual return.
  • Trustees should also stay on top of their duty to file annual scheme returns to The Pensions Regulator.
  • The Pensions Regulator has recently noted that it will start to fine trustees who fail to complete their scheme returns on time.

Authorising conflicts of interest

  • Section 175 Companies Act 2006 requires directors of companies to avoid a situation in which they have, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company.
  • This requirement applies to the directors of pensions trustee companies.
  • This covers a wide range of situations, including:
    • actual or potential conflicts of interest;
    • direct or indirect conflicts of interest;
    • situations where the conflict with the company's interests is actual or potential.
  • Actual or potential conflicts of interest can be authorised by shareholders or directors.
  • It is useful to note that only non-interested directors can authorise a conflict of interest. In scenarios where too many directors are conflicted, the required quorum may not be reached and the only solution is shareholder approval of the conflict.
  • Trustee directors should ensure that all 'situational' conflicts (e.g. pension scheme membership, employees of related employers, office holders and individuals with other company positions, employer group shareholdings and trade union roles) are properly considered and, if possible, authorised.

Appointment and removal of trustee directors

  • There are a few more hurdles to clear in order to appoint or remove trustee directors compared to appointing individual trustees.
  • As well as considering the provisions of the scheme's trust deed and rules, it is important to review the trustee company's articles of association.
  • The trustee company will need to comply with Companies House formalities on the appointment or removal of a trustee director. These will include the completing and filing of the relevant forms at Companies House.

The trustee company should also ensure that the information on directors held on the Companies House register is correct and up to date.