Chapter 11 Controllers and close links - FCA Handbook

In addition, these persons are required to obtain the approval of the competent supervisory authority before becoming controllers or increasing their control over a company. SUP 11.3 is intended to assist these persons in meeting their obligations under Part XII of the Act. The competent supervisory authority must therefore be informed of the auditors and parent companies of foreign companies. Similarly, the competent supervisor should monitor an undertaking's continued compliance with the threshold conditions set out in paragraphs 3B, 4F and 5F.

The relevant regulator must therefore be notified of any changes in a company's close connections. Making an acquisition before the relevant regulator has approved is an offense under section 191F of the Act (offences under this Part). The approval of the relevant regulator is not required before a controller reduces control or ceases to have control of a UK domestic company.

To alleviate these difficulties, the relevant supervisory authority may accept advance notice of proposed changes in control, made in accordance with. The relevant regulatory authority may treat a written communication from a company containing the following statements as a communication in accordance with sections 178 and 191D of the Act:. A section 178 notice given to the relevant regulator by a person who acquires control or increases its control of a UK domestic company, in a manner described in ■SUP 11.4.2 R(1) to (4), or acquires control in a manner described in.

Notifications to the appropriate regulator by proposed controllers and controllers under Part XII of the Act may be made on a joint basis as set out in.

Requirements on firms

Requirement to notify a change in control

Content and timing of the notification

A firm should discuss with the relevant regulator, as soon as possible, any potential change of which it is aware, in the shareholding or voting power of a controller or proposed controller (if the change is material). These discussions may take place prior to the formal notice requirement in ■SUP 11.4.2 Ror■SUP 11.4.4 Increases. Obligations in ■SUP 11.4.2 Rand■SUP 11.4.2A Apply if the controller itself has given or intends to give a notice, in accordance with its obligations under the Act.

Identity of controllers

Notifications by firms

A company's notification under SUP 11.4.7 R (2)(a) need only contain so much information as set out in SUP 11.5.1 Race that the company can provide, after making reasonable inquiries of persons and other sources, if applicable. Companies are reminded that a change in control may give rise to a change in the group companies to which the consolidated financial supervision requirements of the relevant supervisor apply. The company may also be subject for the first time to the requirements of the relevant regulators in the field of consolidated financial supervision.

The relevant supervisory authority may therefore request such a company, such data controller or proposed data controller to provide evidence that, after the change in control, the company will meet the requirements of these rules, if applicable.

Joint notifications

Subsequent notification requirements by firms

Changes in the information provided to the appropriate regulator

Notification that the change in control has taken place

Acquisition or increase of control

Changes in the circumstances of existing controllers

A company must immediately inform the competent supervisory authority if it becomes aware of any of the following matters relating to one or more of its managers: When assessing whether a matter should be reported to the competent supervisory authority under ■SUP 11.8 .1 R (1), ■SUP 11.8.1 R (2) or ■SUP 11.8.1 R (3), an undertaking must take into account the guidance for meeting the threshold conditions set out in paragraphs 2E and 3D of Schedule 6 contained in the law. With regard to SUP 11.8.1 R (3), the competent supervisor is of the opinion that in particular the removal or replacement of a majority of the members of an administrative body (in a single event or a series of related events) is a substantial change and should are reported.

If a matter has already been notified to the relevant regulator (for example, as part of the firm's application for a Part 4A licence), the firm need only inform the relevant regulator of any significant developments. A firm's level of awareness of its controller's circumstances will depend on its relationship with that controller. The relevant regulator does not expect firms to implement systems or procedures to ensure that any changes in the circumstances of its controllers are secure.

However, the relevant supervisory authority expects companies to notify it of such matters if the company becomes aware of them, and it expects companies to make inquiries of its controllers if they become aware that one of the events in■SUP 11.8. 1 R may occur or has occurred.

Changes in close links

Requirement to notify changes in close links

The FCA may request additional information from the firm following a notification under■SUP 11.9.1A R to ensure that the firm continues to meet the threshold conditions (see■SUP 2: Information collection by the FCA and the PRA on its own initiative) . The Close Links notice form approved by the FCA for notices under■SUP 11.9.1A R,■SUP 11.9.5A R can be found on the FCA's website. The Close Links notice form approved by the FCA for notices under. The notification under ■SUP 11.9.1AR (1)(a) must be made electronically by completing the Close Links Monthly Report and submitting it via the relevant platform provided by the FCA.

The Closed Links Monthly Report must contain the information specified in. b) the nature of the close links;.

Timing of notification requirement

Electing to notify changes in close links monthly

Controllers and close Annex 1 links

11Summary of notification requirements

11[deleted]

Controllers and close Annex 6G links

11Aggregation of holdings for the purpose of prudential assessment of

Section 178(1) of the Act applies when a person "decides to acquire or increase control of a UK authorized person...". For the purposes of Part XII of the Act, a person's acquisition of control over a company is determined by virtue of his holding of shares or voting rights in that company or in a parent company of that company. When determining whether control has been achieved, section 178, subsection of the Act requires

The requirement for consolidation of shares and/or voting rights pursuant to section 178, subsection of the Act. Question 5: What types of arrangements amount to acting in concert in respect of acquiring or holding shares or voting rights for the purposes of these sections of the Act. In particular, there are many circumstances where persons who together hold 10% or more of the shares or voting rights of a company or its parent company may engage in a concerted exercise of voting power without this amounting to "acting in concert" in a sense , who require consolidation of their holdings in accordance with section 178, subsection of the Act.

These provisions relate directly to Part XII of the Act and in particular to the meaning of voting power for the purposes of that Part under section 191G (Interpretation) of the Act. Q7: If X has 10% of the voting power in the company and X is controlled by H, which itself does not have a direct interest in the company, then H is the controller. For the purposes of section 178 of the Act, both H and X would have to notify the FCA and obtain approval before acquiring or increasing control.

Q7A: Where X holds 10% of the voting power in a firm and X is a controlled undertaking of H, which in turn is a controlled undertaking of A, A is a controller. Where, for example, shareholders who have no prior agreement regarding the exercise of the rights attached to their shares or voting power agree to act together for the purpose of voting the resolution(s) required to enable them set to control the board of a firm, which is likely to act together for these purposes, although it may not fall within section 422(5)(a)(i) of the Act, if those shareholders have no 'enduring common policy' towards the firm's management. However, an agreement giving certain shareholders veto rights over key decisions by the firm may bring those shareholders within the scope of section 178(1) of the Act, regardless of whether they act in concert, by virtue of their ability to exercise significant influence over the management of the firm - see section 181(2)(c) of the Act.

For example, if the passive shareholder has 2% of the voting power and the active shareholder has 9% of the voting power, they would each be considered to have control (11% of the voting power) because their interests must be combined under the representation provisions of the arrangement. Further guidance on the effect of some typical provisions included in shareholder agreements is contained in the answer to question 14. This guidance has no relevance to the interpretation of 'concerted action' in the context of the Code.