Companies and limited liability partnerships must comply with certain PSC requirements, by identifying individuals who own or control the company, who are referred to as People with Significant Control (PSCs).
In this guide, explain how to identify PSCs and the PSC compliance obligations, as well as the consequences of non-compliance and what happens if a PSC cannot be identified.
What is a person with significant control?
A ‘person with significant control’ (PSC) is any person who owns or controls a company. Also known as ‘beneficial owners’, you must identify and record your PSC(s) and let Companies House know who they are. This might be you or it could be someone associated with your company, where a company can have one or more PSCs.
There are two ways in which a person can be identified as a company’s PSC: if they meet one or more of the ‘nature of control’ conditions or they have ‘significant influence or control’ over the company in another way. In most cases, it is easy to identify a company’s PSCs, but in others it will not always be immediately evident.
What are the ‘nature of control’ conditions?
Most PSCs are those who meet one or more of the following three conditions:
- they hold more than 25% of shares in the company
- they hold more than 25% of voting rights in the company and/or
- they have the right to appoint or remove the majority of the company’s board of directors.
These are known as the ‘nature of control’ conditions. For example, if A owns 100% of the shares for Company X Ltd and the shares have associated voting rights attached to them, A will qualify as a PSC. Similarly if B and C each hold 50% of the shares and voting rights in Company Y Ltd, they will both qualify as PSCs. In contrast, if D holds 75% of the shares for Company Z Ltd and E holds 25%, with associated voting rights attached to them, only D will qualify as a PSC, as E does not hold more than 25% of the shares or voting rights.
To be able to ascertain who is a PSC for your company, you may need to review your company’s register of members for information on shareholders and voting rights. Your company’s constitution, including its articles of association, may also contain information on voting and any other rights associated with ownership of shares. When it comes to ascertaining the right to appoint or remove the majority of directors, if there is only one company director and someone has the right to appoint them, they will meet this condition.
What does ‘significant influence or control’ mean?
It is also possible for someone to be a PSC if they do not meet any of the three ‘nature of control’ conditions, but they exercise or have the right to exercise ‘significant influence or control’ over the company or, alternatively, over the activities of a trust or a firm which meets any of the nature of control conditions in relation to the company.
There are various ways that someone could exercise significant influence or control over a company, even if they have no shares or voting rights. This could include where someone has absolute rights over important decisions relating to the running of the company, for example, an absolute right of veto in relation to:
- adopting or amending the company’s business plan
- changing the nature of the company’s business
- making any additional borrowing from lenders
- appointment or removal of the CEO
- establishing and/or amending any profit-sharing, bonus or other incentive scheme for either directors or employees
- the grant of options under a share option or other share-based incentive scheme.
It could also include where someone does not necessarily have the right to exercise significant influence or control but, in practice, they are able to do so. For example, where a director owns important assets, such as intellectual property rights, or has important relationships that are key to the running of the business, and uses this extra power to influence the outcome of company management decisions.
Equally, it could be where someone is otherwise significantly involved in the company’s management and/or direction, for example, a person who is not a member of the board of directors, but regularly directs or influences a section of the board or is frequently consulted on board decisions and whose views will influence decisions made by the board. It could also include where the recommendations of a particular person are almost always followed by shareholders when deciding how to vote, for example, a company founder who no longer holds a significant shareholding, but makes recommendations on how to vote.
However, in any one of these scenarios, the rules can become complex. Where there are large or complicated company ownership and control structures, you may need to seek specialist advice. Different rules also apply where a company is owned or controlled by another entity, such as a parent company, instead of an individual, where specialist advice should again be sought.
What is the PSC register?
The PSC register is a statutory register that a UK company is required to keep to record details of their beneficial ownership. A company will need to keep a register of its PSC(s), in addition to existing registers, such as the register of directors or members. This is designed to help increase transparency over who owns and controls a company, helping to inform investors when they are considering buying into a company and to support law enforcement agencies in any money laundering investigation. A company must also file the PSC information with the central public register at Companies House.
Once completed, the PSC register must be available for inspection, where you must provide copies on request. The central register at Companies House will also be publicly accessible.
What records of PSCs must be kept?
You must record the details of any PSC(s) on your company’s PSC register, including which of the control conditions are met. As such, before a PSC can be entered on the register, you must confirm the following details with them:
- their name
- their date of birth
- their nationality
- the country or part of the UK where the PSC usually lives
- their correspondence address, known as the service address
- their home address, although this must not be disclosed when making your register available for inspection, unless this is also the service address
- the date they became a PSC of your company
- the date you entered them into your PSC register, and
- the conditions for being a PSC that apply where, for the first two nature of control conditions, this must include the level of their shares and voting rights, expressed as: over 25% up to (and including) 50%, more than 50% and less than 75%, or 75% or more.
For example, where A owns 100% of the shares for Company X Ltd and the shares have associated voting rights attached to them, all A’s details should be recorded on the PSC register, together with the shares and voting rights expressed in the ’75% or more’ banding category. In this scenario, you should also check if A has the right to appoint or remove directors, as this should also be recorded, where appropriate. Importantly, you will only be required to identify whether a PSC meets the ‘significant influence and control’ condition, if they do not exercise control through one or more of the first three conditions.
Where your company is controlled by a trust or firm, you will need to record all trustees or members/partners of the registrable legal entity as PSCs of your company. Where it is necessary to record the details of a company rather than a person, slightly different information is entered on the register, where specialist advice may need to be sought.
If your PSC information changes, such as a change of personal details or nature of control, you must enter the new information on your company’s PSC register within 14 days and provide the updated information to Companies House within a further 14 days. This is once you have become aware of any change(s), obtained the information needed to enter on your own register and confirmed the information if it relates to an individual.
What are the PSC compliance obligations for a company?
By law, when it comes to identifying and recording a company’s PSC(s), an officer of the company is required to do all of the following, where applicable:
- identify the PSC(s) over the company and confirm their information
- record the details of PSC(s) on the company’s PSC register within 14 days
- provide this information to Companies House within a further 14 days
- update the information on the company’s PSC register when it changes within 14 days
- update this information at Companies House within a further 14 days, and
confirm to Companies House that the information on the central public register is accurate, where this has not been updated in the previous 12 months.
If you do not at first know the identity of a PSC, you must take reasonable steps to identify them and confirm their information. You must try to identify and get in touch with anyone who could potentially be a PSC of your company where, if you do not have all of their information, you should send them a notice. This person is then under a legal obligation to provide you with the information you need to register their details.
You may need to place restrictions on the shares and voting rights of any person or entity withholding PSC information to make sure that they provide it. However, applying restrictions is a significant step, where you should only consider this option if the person has repeatedly failed to respond to requests for information. Your company is not legally required to impose restrictions in these circumstances, but you must consider this as part of meeting your legal obligation to take reasonable steps to identify any PSCs.
You may also serve notices on people who you know or have reasonable cause to believe knows the identity of the PSC or could know someone likely to have that knowledge. This could include advisers known to act for them, such as lawyers or accountants, or any other contacts such as business partners, known associates or even family members.
Some individuals might have applied to Companies House to have their PSC information protected. This could be where they are at risk of violence or intimidation as a result of being on the register, for example, the company’s activities mean they could be targeted by activists. If a PSC has made an application for protection, you should record this on your PSC register, where protection from public disclosure applies from the date of application.
Importantly, any failure on your part to provide accurate information on the PSC register and failure of anyone else to comply with notices requiring them to provide information, is a criminal offence. This may result in a fine and/or a custodial sentence of up to 2 years.
What if no PSC can be identified?
Your PSC register must provide information about all the company’s PSCs. However, this may not always be possible, although you must still put a statement in your register to explain why certain information is not available, or the official wording to reflect the progress of the company’s investigations, as your PSC register can never be blank. If you cannot identify a PSC, or do not have one, you will need to inform Companies House.
Person of Significant Control FAQs
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Legal disclaimer
The matters contained in this article are intended to be for general information purposes only. This article does not constitute legal advice, nor is it a complete or authoritative statement of the law, and should not be treated as such. Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should be sought.
Author
Gill Laing is a qualified Legal Researcher & Analyst with niche specialisms in Law, Tax, Human Resources, Immigration & Employment Law.
Gill is a Multiple Business Owner and the Managing Director of Prof Services - a Marketing Agency for the Professional Services Sector.
