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Person with Significant Control (PSC) – A Complete Guide

Published by Dikshya Bhatta
Published Date: April 11, 2024

As the name suggests, persons with significant control, also known as beneficial owners, are the people who own and exercise control of the company and have substantial influence in the administrative and management functions.

The Small Business, Enterprise and Employment Act 2016 introduced the PSC register wherein the PSCs of UK companies are registered. The concept of the PSC register was initiated with the motive of enhancing the transparency of the limited companies in the UK and facilitating economic growth. This register includes details about the individual who exercises control over the company- hence the description 'Person with Significant Control'.

Who Can be Identified as PSC?

The Person with Significant Control must meet one or more of the following conditions:

  • An individual possessing over 25% of the company's shares;
  • An individual possessing more than 25% of the company's voting rights;
  • An individual with the authority to appoint or dismiss the majority of the board of directors;
  • An individual with the entitlement or actual exercise of significant influence or control over the company;
  • In the case where a trust or firm meets any of the first four conditions if it were an individual: Any individual possessing the authority or actually exerting significant influence or control over the operations of said trust or firm.

If any person meets the requirements, the business can have one or more persons of significant control.

For Example, 

Sam owns 100% of the shares of Company A Limited. The shares have associated voting rights attached to them. This means Sam qualifies as a PSC, and their details should be recorded on the PSC register with the appropriate percentage of shares and voting rights. The company should check if Sam has the right to appoint the majority of directors and include this if applicable.

Further, it is possible for a person who does not meet any of the previous conditions to be PSC. This will apply in limited circumstances. An example of this would be in a Company B Limited . George, who does not hold shares, has an absolute right of veto over the company's business plan. George qualifies as a PSC, and their details must go on the register as he exerts significant influence over a company.

What is a Relevant Legal Entity (RLE)?

PSC is an individual and not a legal entity. However, legal entities can own and control companies. A legal entity must be kept on the PSC register if it is relevant and registrable in relation to the company.

A legal entity is relevant to the company if it meets any one or more of the conditions set out to be met for an individual PSC. The legal entity shall keep its own PSC register and provide information on its PSCs to the central PSC register at Companies House. It should have its voting shares admitted to trading on a regulated market in the UK or European Economic Area (other than the UK).

When is RLE Registrable?

A relevant legal entity is registrable in relation to the company if it is the first relevant legal entity in the company’s ownership chain. Figures 1 to 3 below will show the perspective of different companies in the same chain of ownership.

RLE registrable

Figure 1 illustrates that Company B should be entered into Company A's PSC register as it is a registrable RLE. Company B holds more than 25% of the shares of Company A and, as a UK company, Company A is required to maintain its own PSC register. Thus, Company A need not look any further up the chain as regards what it must put in its PSC register - whilst Company C is an RLE, it is not 'registrable' because it is not the first RLE sitting above Company A. In addition, as Company A is 100% owned by Company B (which is an RLE), it does not need to consider if there are any other individual PSCs or RLEs.

Figure 2 illustrates that Company C should be entered into Company B's PSC register for the same reasons as set out in figure 1. There is no requirement to enter P1 in Company B's register even though that individual holds shares in Company B indirectly - Company B is 100% owned by Company C (which is an RLE) and, as such, Company B does not need to consider if there are any other individual PSCs or RLEs.

Figure 3 illustrates that P1 should be entered into Company C's register as its PSC as that individual satisfies one or more of the five PSC Conditions.

RLE Registrable

Figure 4 above differs from the examples at figures 1, 2 and 3 above in that Company A is not 100% owned by Company B and Person 1 also holds shares directly in Company A. It illustrates that Company B should be entered into Company A's PSC register as it is a registrable RLE as it holds more than 25% of the shares and, as a UK company, is required to maintain its own PSC register. However, in addition to this, as Company A is not 100% owned by Company B, Company A should also consider if there are any other RLEs or individual PSCs. As Person 1 holds 30% of the shares of Company A directly, that individual should also be entered into Company A's PSC register as Person 1 satisfies PSC Conditions.

Understanding the Conditions Required to be a PSC in Detail

Let’s look into the details of the conditions that are required to identify as a PSC:

Conditions Required to be a Person with Significant Control

Condition 1: An individual is considered a Person with Significant Control (PSC) if they hold, either directly or indirectly, more than 25% of the shares in the company.

In companies limited by shares, one should look at the incorporation documents and register of members to help work out if one holds more than 25% of shares. While calculating, all shares in the issue should be included using the nominal value of the share and any unissued or cancelled shares should not be included.

Let's delve deeper into ownership arrangements, where determining the percentage of share ownership can be complex due to intricate structures.

  • Nominee: If an individual holds shares or rights through a nominee, they are still considered to hold those shares and may qualify as a PSC. This means that even if shares are held on behalf of the individual by another party, such as a nominee, the individual retains the rights associated with those shares and may be deemed a Person with Significant Control (PSC).
  • Joint Interests: If an individual holds shares or rights in a company jointly with one or more persons, they must consider themselves as collectively holding the total number of shares or rights held by all parties involved. This means that if the combined ownership of shares or rights among the individuals exceeds 25% of the total, each individual must be listed separately on the PSC register. In other words, the cumulative ownership of shares or rights among all parties involved determines whether each individual qualifies as a Person with Significant Control (PSC).
  • Joint Arrangements: In the context of PSC regulations, a joint arrangement refers to a situation where two or more individuals agree to collectively exercise all or most of their rights stemming from their shares in a predetermined manner. If individuals are part of such an arrangement and collectively hold more than 25% of the shares in the company, each party involved must be listed separately on the PSC register. Similarly, if the arrangement pertains to the appointment or removal of directors with a majority of board-level voting rights, each party to the arrangement must be entered separately on the register.
  • Indirect ownership: When individuals hold shares or rights indirectly through a legal entity, they may not need to be listed on the company's register unless that entity is not a Relevant Legal Entity (RLE). In such cases, examination of ownership and control of the legal entity determines if there's a majority stake, demonstrated by holding voting rights, appointing or removing directors, or exercising influence. If an individual has a majority stake in a non-RLE entity, they're listed on the PSC register. If multiple entities are involved, each is assessed to determine registrability. If no one meets the criteria, the company notes this on its PSC register.

Condition 2: An individual qualifies as a Person with Significant Control (PSC) if they hold, whether directly or indirectly, more than 25% of the voting rights in the company.

The voting rights attached to the shares are likely to be set out in the company’s constitutional documents and articles of association. Usually, one voting right is attached to one share. However, there might be cases where shares might not include voting rights. The voting rights provisions in the article of association should be carefully assessed and analysed to determine whether the individual holds more than 25% of voting rights.

Condition 3: An individual is considered a Person with Significant Control (PSC) if they hold, either directly or indirectly, the right to appoint or remove the majority of the directors in the company.

In the context of determining significant control over a company, individuals should assess their authority regarding the appointment or removal of directors with majority voting rights at the board level. This involves understanding the voting rights structure, especially if directors have varying degrees of influence or if there's a casting vote mechanism outlined in the company's Articles. If an individual has the power to appoint or remove directors who could sway board decisions on most matters, they meet the condition for being a Person with Significant Control (PSC).

Condition 4: An individual qualifies as a Person with Significant Control (PSC) of the company if they possess the right to exert significant influence or control over its operations or if they actively exercise such influence or control.

Even though an individual does not meet any of the above-mentioned conditions, they may still have significant influence or control over the company. 

In determining whether an individual exercises significant influence or control over a company, all their relationships with the company and other individuals responsible for its management must be considered. For instance, if a director possesses significant assets or crucial relationships vital to the company's operations, such as intellectual property rights, and utilises this additional leverage to influence business decisions, they may be deemed to exercise significant influence or control.

What Does "Significant Control or Influence" Mean?

Significant Control or Influence

An individual or legal entity with significant control or influence over a company can exert their authority in various ways, as outlined in the PSC guidance provided by Companies House:

  • Directing the activities of a company, trust, or firm.
  • Ensuring that the company, trust, or firm generally adopts desired activities.
  • Exercising absolute decision rights over crucial business decisions, including:
  • Adopting or amending the company's business plan.
  • Changing the nature of the company's business.
  • Making additional borrowing from lenders.
  • Appointment or removal of the CEO.
  • Establishing or amending profit-sharing, bonus, or incentive schemes for directors or employees.
  • Granting options under share-based incentive schemes.
  • Holding absolute veto rights over certain business decisions, such as:
  • Adopting or amending the company's business plan.
  • Making additional borrowing from lenders.
  • Holding absolute veto rights over the appointment of the majority of directors who hold a majority of voting rights on all or substantially all matters.
  • Regularly or consistently directing or influencing a significant section of the board or being regularly consulted on board decisions, with their views significantly influencing decisions made by the board.
  • Providing recommendations to other shareholders on how to vote, with those recommendations consistently followed, even if the individual no longer holds a significant shareholding in the company they founded.

Obligations of Companies and The PSC

Since 6 April 2016, it has been a legal requirement for all limited companies to identify key people within their organisation, often referred to as ‘Beneficial owners’. Even if a company has no key people within the organisation, the fact must be stated at the Companies House.

The company must take reasonable steps to identify any registrable PSC and keep the register up to date. As part of this process, it must give notice to someone it knows or has reasonable cause to believe is a PSC. Also, it may give notice to anyone it knows or has reasonable cause to believe knows the identity of the registrable PSC or someone likely to have that knowledge.

Any person who knows or ought to know that they are registrable must notify the company of their status (i.e., that they are a PSC) and provide the required details as mentioned below. In addition, any person who receives notice from the company (because they may be a registrable person or know the identity of a registrable PSC or know someone likely to have that knowledge) must confirm or supply the information requested within a month.

Person with Significant Control (PSC) Register

A person with significant control of the UK company or PSCs should have their particulars, including their names and nationalities, entered on a PSC register, which would be maintained by the company and opened to public scrutiny.

If the PSC of the UK company is another company, whether UK or foreign-registered, it is required to drill through all intermediate companies until one arrives at a human being who exercises or can control the exercise of significant control of the UK company.

The company must keep an updated PSC register and ensure that the PSC information kept in the central public register held by the Companies House is also updated through the annual confirmation statement.

Information You Need to Record on The Register

The company will keep the details of PSC and RLE on its own register and provide the details to the central register at Companies House.

the details of Person with significant control (PSC)

Before recording the information of the PSC on the central register, the following details need to be confirmed:

  • Name
  • Date of birth
  • Nationality
  • Country, state, or part of the UK where the PSC lives
  • Correspondence address
  • Residential address (this is not disclosed to the public)
  • The date they became a PSC in relation to the company
  • All nature of controls which apply
  • Also include the level of their shares and voting rights

After confirming the details, the company shall record the information in its PSC register. It shall mention which of the abovementioned criteria causes the individual to be regarded as PSC.

For a registrable RLE, the following information needs to be entered into the central register:

  • Name of the legal entity
  • The address of its registered or principal office
  • The legal form of the entity and the law by which it is governed
  • The date it became a registrable RLE in relation to that company
  • Which of the five conditions for being a PSC are met, with quantification of the interest where relevant.

Where is The Information Kept and Made Available?

Companies required to maintain their own PSC register must ensure that the register is accessible to individuals having legitimate reason. However, the company cannot disclose residential addresses when granting access. Companies House shares information with law enforcement agencies and may provide residential addresses to credit reference agencies and certain public authorities in specific situations.

Private companies or LLPs can choose to maintain their PSC register at Companies House, with most information being publicly available except residential addresses. The company must notify PSCs at least 14 days in advance if they opt for this, and they must inform Companies House of any changes within 14 days of becoming aware.

What Should You do if Your PSC Information Changes?

Changed information about personal details or the nature of control needs to be recorded in the company's PSC register within 14 days of the change. This changed status must also be communicated to Companies House within 14 days following the first 14-day window.

Failing to keep appropriate records or providing false information in an untimely manner to the Companies House could be a legal offence where the company shall face financial and legal consequences imposed by the Companies House or even imprisonment.

Removing Information from the Register

Individuals must notify the company when ceasing to be a PSC or registrable RLE. The company, if applicable, must update its own PSC register within 14 days of learning about the change and update the central register at Companies House within an additional 14 days. Information about the individual must be retained by the company for ten years after they cease to be a PSC.

In the event of incorrect information on the PSC register, individuals should inform the company, which must update its own register within 14 days and the central register at Companies House within another 14 days. The incorrect information remains publicly accessible even after correction.

When disputing information on the register, individuals must take legal action by making an application to court. This process involves formally challenging the accuracy or validity of the information recorded about them in the register. In such cases, seeking professional advice is advisable to understand the legal complexities involved and to ensure that the dispute is handled effectively.

How to Notify The Companies House Regarding the Changes in PSC?

Persons with Significant Control (PSC)

To notify Companies House regarding changes in Persons with Significant Control (PSC), follow these steps:

  • Access the Companies House online filing service: Log in to your Companies House online account or create one if you still need to do so.
  • Select the appropriate form: Choose the form that corresponds to the type of change you are notifying. For example, if there's been a change in the details of a PSC, you may need to use form PSC01. If a new PSC has been identified, you may use form PSC07.
  • Complete the form: Provide all required information accurately. This typically includes details about the company, the nature of the change, and updated information regarding the PSC.
  • Verify the information: Double-check all information on the form to ensure accuracy and completeness.
  • Submit the form: Once you've completed and verified the information, submit it through the Companies House online filing service.
  • Pay any applicable fees: Depending on the nature of the change, a fee is associated with submitting the form. Ensure that any applicable fees are paid.
  • Await confirmation: Companies House will process the information and update their records after submitting the form. You may receive confirmation of the changes once they have been successfully processed.

Additionally, when a company files a confirmation statement, it confirms that the PSC information on the public register is correct and up to date.

Conclusion

Understanding the Persons with Significant Control (PSC) concept is crucial for ensuring transparency and compliance within UK companies. The PSC register, introduced under the Small Business, Enterprise and Employment Act 2016, enhances transparency and fosters economic growth by documenting individuals who exert substantial control over companies. Identifying PSCs involves assessing various criteria, such as shareholding, voting rights, and influence over key decisions.

Additionally, relevant legal entities (RLEs) must be registered if they meet specified conditions. Maintaining accurate PSC registers and promptly updating the Companies House of any changes is essential to meet legal requirements and avoid potential penalties.

Moreover, individuals disputing information on the register have recourse to legal action, underscoring the importance of accuracy and accountability in PSC reporting. Adherence to PSC regulations promotes corporate integrity and trust, laying the foundation for a transparent and accountable business environment.

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Dikshya Bhatta
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