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Business Definitions: Person of Significant Control

Business Definitions: Person of Significant Control

 

Whether you run a small enterprise or a large business, positions of hierarchal seniority are inevitable: from the company owner, right down to the newest recruit. Subsequently, official documentation to reflect an individual’s ownership of a company is mandatory, outlining which company member is a person of significant control.

 

What Does a Person with Significant Control (PSC) Mean?

 A person with significant control (PSC) is an individual who controls or owns a company, sometimes called “beneficial owners”. As long as they meet the necessary requirements, your business can have one or more person of significant control.

The obligatory process of maintaining a register for people of significant control (PSC register) was first introduced on 6th April 2016. It’s since become a legal requirement for all UK private companies, limited liability partnerships (LLPs), and Societas Europaea (SEs) to maintain a statutory register with details about the people or person of significant control.

Greater transparency is one of the key objectives of the PSC register. When enforcement agencies have clear documentation of who is the ultimate person of significant control in your company, corporate trust is greatly improved. Such transparency can help improve corporate practices, prevent financial laundering, and assist in sanctioning individuals who do not disclose ownership/control of UK companies with the intention of facilitating illegal activity.

 

What Conditions Does a Person of Significant Control Need to Meet?

A person of significant control should meet one or more of the following five conditions:

  1. Individual must directly (or indirectly) have over 25% of the company’s issued share capital.
  2. Individual must directly (or indirectly) have over 25% of the company’s voting rights.
  3. Individual must directly (or indirectly) have the right to appoint or remove a majority of the board of directors.
  4. Individual must have the right to exercise (or presently exercises) considerable influence or control of the company, limited liability partnership or SE.
  5. Individual must have the right to exercise, (or presently exercises) considerable influence or control over the activities of a trust/firm that is not deemed a legal entity, but would itself satisfy any of the first four conditions if it were an individual.

 

What Constitutes “Significant Control”?

As stated, a person of significant control who has ultimate influence over a company can come in the form of an individual or a legal entity, such as another company/firm. According to Companies House, “significant control” and “influence” is defined in a number of ways:

  • A person of significant control takes ownership of a company’s activities (or a trust/firm).
  • A person of significant control can be sure that a company, trust, or firm, generally adopts the activities which they desire.
  • A person of significant control has the ultimate say concerning rights over decisions regarding the running and procedures of the company. For example:
    • Adopting or modifying the company’s targets and business plan.
    • Amending the nature of the company’s business.
    • Deciding on any relevant borrowing from lenders.
    • Appointing or removing the company’s CEO.
    • Outlining or executing any modifications to profit-sharing, bonus or other incentive schemes of any nature for both directors and/or employees.
    • The grant of choices under a share option or other share-based incentive scheme.
  • A person of significant control has the ultimate right to veto the appointment of the majority of directors — those directors who hold a majority of the voting rights at meetings of the board on all, or substantially all, matters.
  • Although a person of significant control may not be a member of the board of directors, they frequently and consistently direct or influence a significant section of the board, or regularly offer consultation and influence on board decisions.
  • A person of significant control may be a company founder whose shareholding is no longer significant in the company that they started, but make recommendations to the other shareholders regarding the manner in which the voting should be made — recommendations that are always, or almost always, followed.

 

What Details Are Required by the PSC Register?

The required information for your company’s PSC register depends on whether the person of significant control is an individual or a registrable relevant legal entity (RLE).

If the person of significant control is an individual, you must record the following details:

  • Individual’s name
  • Individual’s date of birth
  • Individual’s nationality
  • Individual’s country/state of residence
  • Service address
  • Usual residential address (only if the residential address is not used as the service address)
  • Date on which the individual was assigned the company’s PSC
  • Date on which the PSC register was updated
  • Which of the five PSC conditions (above) have been satisfied, with quantification of the interest where relevant.
    • For conditions 1) and 2) this must include the level of an individual’s shares and voting rights, within these brackets: over 25% up to 50%; more than 50% and less than 75%; 75% or more.
  • Any limitations or restrictions on the public disclosure of the person of significant control’s details.

If the person of significant control is a registrable RLE, you must record the following details:

  • Registered name.
  • Registered office address or principal office.
  • The legal form (and the law by which it is governed).
  • Registration number and company register on which the RLE is disclosed.
  • Date on which it became a registrable RLE with relation to your company.
  • Which of the five conditions above for being a PSC have been satisfied, with quantification of its interest where relevant.

 

How Do You Update and File a PSC Register at Companies House?

All newly formed companies must submit their person of significant control details upon incorporation (this has been true since 30thJune 2016). Any changes made thereafter, have to be outlined in the company’s register of persons of significant control within 14 days.

Additionally, Companies House must be informed of the amendments within an additional 14 days on top of the initial 14 days. This is known as the “14+14 rule”, which essentially means that the company’s and Registrar’s records must be updated within 28 days of your PSC amendment.

Filing of a PSC at Companies House is processed using the nine PSC forms (from PSC01 to PSC09). Additionally, when a company files a confirmation statement at Companies House(CS01), it is confirming that the details on the public register pertaining to the PSC is correct and up to date.

NOTE:The PSC register must NOT be left blank. If you are SURE that your company has no person of significant control who satisfies any of the above five conditions, then the following statement must be added on the register:

“The company knows or has reasonable cause to believe that there is no registrable person or registrable relevant legal entity in relation to the company.

 

How Long Do Companies Have to Keep PSC Information?

By law, companies must keep information about a person of significant control for ten years after they have ceased the position as a company’s person of significant control. Companies House will store these details indefinitely.

 

Who Has the Responsibility of Maintaining the PSC Register?

Company directors and secretaries (and SE directors and secretaries), as well as designated LLP members are legally responsible for obtaining and confirming details of the person of significant control. They must also maintain the register and process the information of person of significant control on the annual confirmation statement for Companies House. It’s considered a breach of statutory duty if this responsibility is not upheld. A personal fine and/or a prison sentence of up to two years may be given if found guilty.

 

Inspection Implications of a PSC Register

You have to keep your PSC registered at your registered office or SAIL address and it must be perpetually available for inspection purposes as and when required. Inevitably, Companies House has to be informed about your PSC register’s location.

Your PSC register may be inspected by any individual or organisation free of charge. They can also obtain a copy for around £12. However, when granting access to the PSC register, you must be sure to not disclose the residential address of a person of significant control.

 

Remember…

Current statutory registers (including registers of shareholders, guarantors, company directors, company secretaries or LLP members) are not replaced by the PSC register. All existing statutory registers must be maintained.

If you want to find out more about a PSC register and how to process and maintain the information of a person of significant control, contact our helpful and friendly company formations team today! 

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