ASK MAT - Can a Jersey company be a Relevant Legal Entity (RLE) classified as a Person with Significant Control (PSC) for a UK entity

ASK MAT –

• Can a Jersey company be a Relevant Legal Entity (RLE) classified as a Person with Significant Control (PSC) for a UK entity

MAY SAYS –

• Yes, a Jersey company can be a Relevant Legal Entity (RLE) classified as a Person with Significant Control (PSC) for a UK entity.
• However, it must meet specific criteria outlined in the UK’s PSC regime under the Companies Act 2006 and related regulations.

Here’s a clear explanation:

Key Criteria for a Jersey Company to Qualify as an RLE

1. An RLE is a corporate entity that can be recorded on a UK company’s PSC register if it meets the following conditions:
   1. PSC Conditions (Condition A): The Jersey company must satisfy at least one of the five PSC conditions as if it were an individual:
      1. Holds, directly or indirectly, more than 25% of the shares in the UK company.
      2. Holds, directly or indirectly, more than 25% of the voting rights in the UK company.
      3. Has the right, directly or indirectly, to appoint or remove most of the board of directors of the UK company.
      4. Has the right to exercise, or actually exercises, significant influence or control over the UK company.
      5. Has the right to exercise, or actually exercises, significant influence or control over a trust or firm (without legal personality) that meets any of the above conditions.
   2. Transparency Criteria (Condition B): The Jersey company must meet one of these transparency requirements:
      1. It is subject to its own disclosure requirements, such as maintaining a PSC register (typically applicable to UK companies, so not usually relevant for Jersey companies).
      2. It has voting shares admitted to trading on a regulated market in the UK, the European Economic Area (EEA), or specific markets in the USA, Japan, Switzerland, or Israel (e.g., the London Stock Exchange or NASDAQ).
      3. The entity may be subject to disclosure requirements in its home jurisdiction that are deemed equivalent to the UK’s PSC regime or the EU’s Fourth Anti-Money Laundering Directive (4AMLD).

1. 1. 1. 1. For Jersey Companies: while robust for anti-money laundering purposes, Jersey's beneficial ownership regime does not provide public transparency equivalent to the UK’s PSC register or EU 4AMLD.
         2. unlisted Jersey companies typically do not qualify under this criterion unless they are subject to additional, specific transparency obligations (e.g., through a listing or other regulatory framework).
   2. Registrability (Condition C):
      1. The Jersey company must be the first RLE in the UK company’s ownership chain.
      2. Only the closest RLE to the UK company is registrable; entities further up the chain are not recorded on the UK company’s PSC register.

2. Specific Considerations for a Jersey Company
   1. Unlisted Jersey Companies: If the Jersey company is not listed on a regulated market (e.g., LSE) and is not subject to equivalent transparency requirements, it typically does not qualify as an RLE. In this case, the UK company must “look through” the Jersey company to identify any individuals or entities further up the ownership chain who may qualify as PSCs or RLEs. For example, the beneficial owners of the Jersey company might need to be recorded as individual PSCs if they exercise significant control over the UK company.
   2. Listed Jersey Companies: If the Jersey company is listed on a qualifying regulated market (e.g., LSE), it can be recorded as an RLE on the UK company’s PSC register, provided it meets one of the PSC control conditions (e.g., holding >25% shares or voting rights). In this case, the UK company does not need to look further up the ownership chain to identify individual PSCs.
   3. Jersey Trusts or Structures: If the Jersey company is a trustee of a trust (e.g., a Jersey property unit trust), additional analysis is needed. If the trustee company is not an RLE (e.g., unlisted, and not subject to transparency rules), the UK company may need to assess whether the trust’s beneficial owners or other individuals exert significant control and should be recorded as PSCs.
3. Practical Implications
   1. Due Diligence: The UK company must take “reasonable steps” to determine if the Jersey company is an RLE. This includes reviewing the Jersey company's shareholdings, voting rights, governance documents, and listing status.
   2. Recording Details: If the Jersey company qualifies as an RLE, the UK company must record its details in the PSC register, including:
      1. The company’s name.
      2. The register where it appears (e.g., Jersey Financial Services Commission register).
      3. The nature of control (e.g., >25% shares or voting rights, within specific bands like 25–50%, 50–75%, or >75%).
      4. Unlike individual PSCs, RLE details do not require confirmation before entry.
      5. Filing with Companies House: The UK company must notify Companies House within 14 days of entering the RLE’s details in the PSC register. Changes to RLE status or details must also be updated within 14 days of confirmation.
      6. Non-Compliance: Failure to identify or record an RLE (or to take reasonable steps to do so) is a criminal offense, potentially resulting in fines or up to two years’ imprisonment for company officers.

Challenges and Recommendations

1. Complexity: Determining whether a Jersey company is an RLE can be complex, especially with indirect ownership, trusts, or nuanced control arrangements (e.g., “significant influence or control” under Conditions 4 or 5). Professional legal advice is often recommended.
2. Jersey’s Transparency Rules: Jersey has its own beneficial ownership regime, which is not equivalent to the UK’s PSC register requirements. Unless the Jersey company is listed on a qualifying market, it typically won’t meet the transparency criteria for RLE status.
3. Anti-Avoidance: The PSC regime includes anti-avoidance provisions to prevent entities from using non-RLE structures (e.g., unlisted offshore companies) to obscure ownership. If a Jersey company is not an RLE, the UK company must diligently trace control to individuals or registrable entities.

Conclusion

1. A Jersey company can qualify as a Relevant Legal Entity (RLE) and be recorded as a Person with Significant Control (PSC) for a UK entity if it meets at least one PSC control condition (e.g., >25% shares or voting rights) and satisfies the Transparency Criteria (Condition B), typically by having voting shares listed on a regulated market like the LSE Main Market or NYSE. Other transparency criteria (e.g., maintaining a public PSC-style register) are rare for Jersey companies unless listed.
2. Transparency Criteria (Condition B): A Jersey company must:
   1. Maintain a public PSC-style register, which is unlikely as Jersey’s beneficial ownership registry is private and not equivalent to the UK’s public PSC regime.
   2. Have voting shares listed on a qualifying regulated market (e.g., LSE Main Market, NYSE, Euronext, or specific markets in the USA, Japan, Switzerland, or Israel).
      1. Listed Jersey Companies: These qualify as RLEs if they meet PSC control conditions, simplifying compliance as no further investigation up the ownership chain is needed.
      2. Unlisted Jersey Companies: These typically do not meet Condition B, requiring the UK company to investigate further to identify individual PSCs or other RLEs in the ownership chain.
   3. Be subject to disclosure requirements equivalent to the UK’s PSC regime or the EU’s Fourth Anti-Money Laundering Directive (4AMLD).
      1. However, Jersey’s private beneficial ownership regime does not meet this public transparency standard,  

3. Compliance Recommendations:
1. Verify the Jersey company’s listing status, document reasonable steps to identify RLEs or PSCs, and consider legal advice for complex structures (e.g., trusts or indirect ownership) to ensure compliance with the UK PSC regime.