VI. Defaults http://www.srz.com/ Failure by a relevant company or LLP to take reasonable steps to identify its PSCs is a criminal offence. The punishment (applicable to both the company and any officer in default) is an unlimited fine and/or two years’ imprisonment. The default provisions for persons to whom a notice is sent by a relevant company or LLP are more complex. If default is made on a notice issued by a relevant company or LLP, that company or LLP may issue a ‘warning notice’, and if, after a one-month period, the default continues, the company or LLP may issue a ‘restrictions notice’. A restrictions notice has the key effects of prohibiting transfers, prohibiting the exercise of rights attaching to the relevant shares or interest, and prohibiting distributions or payments on the relevant shares (except on liquidation).11 A restrictions notice must be withdrawn by the relevant company or LLP if: (1) the original notice is complied with; (2) it is satisfied that there is a valid reason justifying the default; or (3) it discovers that a third party’s rights are being unfairly affected. Separately, if a person to whom a notice is sent by a relevant company or LLP fails to comply with that notice, or knowingly or recklessly makes a statement which is false in a material particular, or if a PSC fails in its own duty of disclosure described above, it commits a criminal offence, for which the punishment is again an unlimited fine and/or two years’ imprisonment. Jim McNally is a partner and Anthony Lombardi is an associate at Schulte Roth & Zabel.

They can be contacted at: jim.mcnally@srz.com; and anthony.lombardi@srz.com. 4 04/16 Copyright NOTES 1 It is anticipated that Scottish limited partnerships will be brought within the scope of the PSC Regime at a later date. 2 See the SRZ Briefing ‘Viewing the Shareholder Register’. 3 See the SRZ Briefing ‘FCA Rules on Trade Reporting’. 4 Similarly, companies with voting shares admitted to trading on a European Economic Area regulated market (excluding those in the United Kingdom) or on certain markets in Switzerland, the United States, Japan and Israel are not subject to the PSC Regime. 5 Further statutory guidance has been issued regarding the meaning of ‘exercising significant influence or control’ as relevant for conditions 4. and 5.. In short, a person will be generally deemed to have significant influence in circumstances where they can ensure that the company or LLP adopts those policies or activities required by that person. A person will be deemed to have ‘control’ if they have the power to direct the policies and activities of the relevant company or LLP. 6 A legal entity will only be registrable itself if it comes within the definition of a person with significant control over the company if it had been an individual and it is subject to its own disclosure requirements (i.e.

if it is a relevant U.K. company or LLP or subject to the DTR regime). 7 The statutory guidance referred to in endnote 10 below includes specific guidance for what should be included on the PSC Register in circumstances where: (1) the company or LLP has no PSCs; (2) there are unidentified PSCs; (3) there are unconfirmed particulars for PSCs; and (4) the company or LLP is still taking reasonable steps to ascertain certain details regarding its PSCs. 8 There are some transitional provisions for those PSCs potentially falling into this category on April 6, 2016 if they apply for their information to be protected before June 30, 2016. 9 There are special rules for PSCs who only hold their interests through one or more legal entities, each of which they have significant control over. 10 See Annex 3 of the guidance document, at https://www.gov.uk/ government/uploads/system/uploads/attachment_data/file/515720/ Non-statutory_guidance_for_companies__LLPs_and_SEsv4.pdf 11 No court order is required for a restrictions notice to have effect (unlike under the similar regime for U.K. public companies under Part 22 of the CA 2006, as referred to above). ஽ 2016 by The Bureau of National Affairs, Inc. TPETS ISSN 1754-1646 .