Since the 6th April 2016, UK registered companies have been required to create and maintain a Register of People with Significant Control (PSC Register). So what does a company need do to create its PSC register and keep it updated?
All companies are required to take ‘reasonable steps’ to ascertain if their company is in need of a PSC register. This will most definitely be the case if you know that your company has people with significant control or influence over how things are run. Where you can identify these people, you will need to record their details on your company PSC register.
Exactly what constitutes ‘reasonable steps’ can be interpreted quite differently from company to company, but as a company owner or director you must make sure you comply with the rules. Failure to create and maintain a PSC register where there is a need may see you being hit with penalties from HMRC for non-compliance.
So, lets take a look at the process of checking to see if you need a PSC register and who should be included in one.
Who would qualify for the PSC register?
Depending on the size of your company and how it is structured, you have to define whether there are any people within your company that hold any significant control or a registrable Relevant Legal Entity for the company. You can usually identify them if they meet one or more of the following conditions:
- They have the power to appoint or remove a majority of the company’s board
- They have the right to exercise or actually exercise significant influence or control over a trust or a firm that is not a legal entity
- They have the right to exercise or actually exercise significant influence or control over the company
- They hold more than 25% of the company’s shares
- They hold more than 25% of the company’s voting rights
Once you have established that there are such people that would qualify for inclusion on your PSC register, you can then set about adding them to your register. In most cases the identity of these people will be quite obvious. This could be as simple as having a small company with just two or three shareholders who each own equal shares in the company. In this case your register will consist of only these two or three shareholders who have been identified as your PSCs.
Things can become a little more complicated under some circumstances, and a bit more homework will need to be done to establish the PSCs for your company. This can arise if any of the following apply:
- A shareholders’ agreement exists that confers special rights upon certain shareholders
- Any other agreement or covenant exists that gives certain persons special rights
- Shareholders hold shares on behalf of or are directed to vote by someone else
- Shares or rights are held as part of a trust or firm without its own legal identity
- Shares or rights are held by corporate entities, only some of which need to be included in the register. In some cases, it’s necessary to look further up the chain of ownership to identify PSCs
- The company has adopted bespoke articles of association
- There’s the possibility that shareholders have arrangements in place to act together
Under more complicated circumstances, you can only consider the information and documentation you have available to you and base your decisions on that. Sometimes it is best to err on the side of caution just in case. You will still need to check over your register of members, shareholder agreements and other paperwork relating to voting rights and the articles of association to show that you have thoroughly checked for all possible PSCs to be added to your register. You should keep a detailed record of what steps and actions you took. This will show Companies House that you have taken ‘reasonable steps’ to identify all possible PSCs within your company should they launch an investigation.
What if I have no Persons of Significant Control?
Should you conclude from your research that you don’t have any PSCs within your company, then you can simply add a statement to your PSC register saying exactly that. Should this change in the future then you can amend your PSC register and update it with your new listings. You can still record that between whatever dates there were no relevant PSCs in your company just for your own information.
Checking the status of possible PSCs
When you are reasonably sure you have a possible PSC or registrable Relevant Legal Entity (RLE) to add to your register, or even a mix of both, but you don’t know who they are without getting further information from them, you will need to contact your potential PSCs to confirm their PSC status. A company must give notices under section 790D of the Companies Act 2006 to anyone who it knows or has reasonable cause to believe is a PSC or registrable Relevant Legal Entity. This can be done by post or email. This can sometimes be quite a long-winded process that may involve writing to other people who may have information to help formally identify a particular PSC.
Writing a notice to an individual PSC
When you are writing a notice to an individual PSC, the addressee must respond to state whether or not they are a registrable person in respect of the company. When this is the case they must confirm or amend certain particulars included in the notice, and also supply any missing information required.
Before you can enter a person onto your PSC register, you must first get confirmation that the information you hold about them is correct. So no matter how comprehensive your information may be, you must still undertake this confirmation step before going ahead and entering them onto the register.
Writing notices to a corporate entity
When writing a notice to a relevant legal entity to establish their PSC status, they must reply confirming whether or not it is a registrable Relevant Legal Entity, to confirm or amend specified particulars included in the notice, and update you with any missing information. Getting confirmation from RLEs that their details are correct and complete will be necessary before they can be entered onto your PSC register.
Contacting others for information about PSCs
Sometimes it may be necessary to go out of your way to establish the identity of a potential PSC for your register. This can happen when you don’t have enough information about a person or RLE to be able to clearly identify them in enough detail for the register. In these cases you will need to serve notice requesting information about that person or RLE from someone else who may be able to help to identify them for you.
You may be able to write to intermediaries for help with this matter. These may include family members, known business partners, financial advisors, bankers, accountants or solicitors etc. Anyone that you contact for information with a section 790D notice must reply within 30 days of the notice by law. Obviously this whole process could be quite time-consuming, especially if the persons or companies you contact don’t reply immediately. Once you have received a reply with the information you need about the PSC or RLE, you will still have to write to them to obtain their confirmation that all their details are correct.
It may be that you come across a situation where a possible PSC isn’t registrable because they are actually holding shares in your company on behalf of another person. They in turn should supply you with the contact details for the relevant person, so then you have to write to the next person to establish and confirm their PSC status.
Updating your Company PSC Register
After all the necessary work that you have put into creating your PSC register, you must then ensure that the register is kept up to date. You should consider your register as an ongoing task that can never be completed and put to bed. It may be that at the time of creation your register is actually empty, but that doesn’t mean to say it will remain empty forever. Remember that your register should never be completely blank. Even when you have no PSCs to record, you should have a statement entered onto your register to confirm this. When setting up a new PSC register and while undertaking your information gathering activities, you should also make an entry to state that you have not yet completed your reasonable steps to establish your PSC list.
As soon as you have the confirmed confirmation of a PSC or RLE, you should enter this into your register straight away. You should also enter that you have reason to believe a PSC exists but you are awaiting a reply from your section 790D notice. Also note down where a notice has been issued but they have failed to reply within 30 days. As you update your register, some of your entries and statements will no longer be applicable. You should record these changes on your register along with the date that your previous statement became no longer applicable.
You must ensure that your PSC register is kept up to date with any changing information. Failure to do so is a criminal offence and you will receive harsh penalties from HRMC for not complying with the law. To make sure that you keep on top of your register you will need to set up a process to ensure that all changes are acted upon swiftly and regularly. This job could be allocated to a member of staff who would be responsible for checking and updating your register on a regular basis as well as chasing up new PSCs to confirm their information for entry.
Here is a list of changed that would need to be acted upon for your PSC register:
- You get a new PSC or RLE to add to the register, such as when someone buys shares that add up to more than 25% of the company’s share capital
- Changes to the details for an existing PSC or RLE, such as a change of address or an RLE’s company name
- The PSC’s control over the company changes, such as the buying or selling of shares to give them more or less influence
- Someone ceases to be a PSC or RLE because they sold their shares completely or sold sufficient to no longer own more than 25% of the company shares
The onus on keeping the company informed of changes is on the actual person of significant control. They should notify the officer in charge of maintaining the company PSC register of a change to their status should they purchase more shares that affect their level of influence, or if they no longer meet the PSC requirements through selling their shares.
Your PSC Register and Companies House
Companies House are responsible for holding and maintaining a global register of PSCs that can be inspected by the public. This is why your company has to update Companies House with the details of our PSC register on a regular basis. You must keep a copy of your own PSC register and make it accessible for anyone with a proper reason for accessing it.
Most companies will have reported their PSC register with their first Confirmation Statement. The annual return was replaced by the Confirmation Statement on 30th June 2016. The details of your PSC register, along with any history statements you included in your register for the year, must be submitted to Companies House.
Once you have submitted your first PSC register with your Confirmation Statement, any further changes to your register from then on need only be reported at your next annual Confirmation Statement.