UK: People Of Significant Control

Last Updated: 11 May 2016
Article by Debbie J Farman

People of Significant Control: a summary

From April 2016, private UK companies and Limited Liability Partnerships (LLPs) have to create and maintain a register of People with Significant Control (PSCs). From June 2016, the PSC information has to be included on the new confirmation statement which replaces the annual return that is filed at Companies House.

Companies covered by the regulations

The People of Significant Control (PSC) Regulations 2016 apply to UK incorporated companies limited by shares, companies limited by guarantee (including community interest companies) and Societas Europaea (SEs). In addition, Limited Liability Partnerships (LLPs) will be subject to the requirements following the implementation of secondary legislation.

However, the requirements do not apply to UK companies that are subject to Chapter 5 of the Financial Conduct Authority's Disclosure and Transparency Rules (DTRs), or companies with voting shares admitted to trading on a regulated market in the UK or European Economic Area (other than the UK) or on specified markets in Switzerland, the USA, Japan and Israel.

The regulations state that companies are required to:

  • Take reasonable steps to find out if there are people who have significant control or influence over the company
  • Contact these people (or others who might know them) to confirm they meet one or more of the conditions and get the relevant information – it's worth noting that PSCs (or anyone who might know about a PSC), must respond to these requests for information, as they too are subject to the requirements
  • Put the information on the company's own PSC register
  • File the information at Companies House to be made available on the central public register
  • Keep the information up to date

Identifying a PSC

A PSC is an individual who meets one or more of the following conditions in relation to the company:

i. Directly or indirectly owning more than 25% of the shares

ii. Directly or indirectly holding more than 25% of the voting rights

iii. Directly or indirectly holding the right to appoint or remove the majority of directors

iv. Otherwise having the right to exercise, or actually exercising, significant influence or control

v. Holding the right to exercise, or actually exercising, significant influence or control over the activities of a trust or firm which is not a legal entity, but would itself satisfy any of the first four conditions if it were an individual.

If any of the first three conditions are met, then you do not need to worry about the last two (iv or v).

Note that the conditions for identifying a PSC within a Limited Liability Partnership (LLP) vary slightly. See FAQs on page 7.

When a PSC has been identified, you need to obtain, confirm and then enter the following details on the PSC register about them:

  • Name
  • Date of birth
  • Nationality
  • Country, state or part of the UK where the PSC usually lives
  • Usual residential address
  • Service address (if different to the residential address)
  • The date the individual became a PSC
  • Which of the five conditions for being a PSC the individual meets
  • If there are any restrictions on disclosing the PSC's information

Relevant Legal Entity (RLE)

A PSC is by definition an individual, and not a legal entity. (Although, the company might be owned or controlled by a legal entity, and not an individual.) A legal entity must be put on the PSC register if it is both relevant and registrable.

A legal entity is relevant in relation to your company if it meets any one or more of the conditions (i) to (v) above and;

  • Holds its own PSC register, or
  • Is subject to DTRs, or
  • Has voting shares admitted to trading on a regulated market in the UK or EEA (other than the UK) or on specified markets in Switzerland, the USA, Japan and Israel

A RLE is registrable in relation to your company if it is the first relevant legal entity in the company's ownership chain.

Where a RLE has been identified, the following details must be obtained and entered into the PSC register:

  • Name of the legal entity
  • The address of its registered or principle office
  • The legal form of the entity and the law by which it is governed
  • Registration details
  • The date the legal entity became a RLE
  • Nature of control

What does 'significant influence or control' over a company mean?

Condition 4 states that any individual who has the right to, or actually exercises significant influence or control over the company needs to be entered into the PSC register. We currently have only draft statutory guidance on the meaning of 'significant influence or control' but this guidance states:

  • Significant influence' means that a person can ensure that the company adopts those policies or activities which are desired by the holder of the significant influence
  • 'Control' means the direct power to direct the policies and activities of the company

Significant influence or control can go beyond the financial and operating policies of the company and does not have to be exercised by a person just for their own economic gain. It also covers the direct or indirect right to exercise actual significant influence or control (whether the right is created through provision in a company's articles, shareholders' or investors' agreement, share rights or otherwise).

Any person holding such a right must be entered in the PSC register, irrespective of whether that right has been or will be exercised.

Examples given in the draft statutory guidance of rights to, or actual exercise of, significant influence or control include:

  • Having absolute decision rights or veto rights over decisions relating to the running of the business of the company
  • Being involved in the day-to-day management of the company when they are not a member of the board (or even a shareholder)
  • Recommendations that are always or almost always followed by the shareholders (which hold the majority of the voting rights in the company) when they decide how to vote.

The draft guidance goes on to identify 'safe harbours' (roles and relationships which usually mean a person won't be exercising significant influence or control). These include directors and employees acting within their role in the company, together with the usual third party, statutory, regulatory and advisory parties (suppliers, lenders, regulators, liquidators, lawyers and accountants, etc.) as well as a person who makes recommendations to shareholders on a one-off issue that is then voted on.

Companies without PSCs

The PSC requirements apply whether the company has a PSC or not. If all reasonable steps have been taken and the company is confident that there are no individuals or legal entities which meet any of the conditions, a statement to this effect must be added into the register.

Confirming information

The company must confirm information about a PSC before it is entered on to the PSC register. This applies if the company has reason to believe there is a PSC, but have not identified who they are. Or if the company knows who they are, but does not have their full details. Again, statements to this effect must be entered into the PSC register.

Protection regime

There may be circumstances where a PSC's required particulars should be suppressed from public disclosure to protect individuals at serious risk of harm.

The grounds for an application for protection are where there is a serious risk that the PSC, or a person who lives with the PSC, will be subjected to violence or intimidation if their PSC information is publicly disclosed. This risk of physical harm must also be due to the company's activities, or circumstances specific to an individual PSC and their link to the company.

PSC and RLE obligations

Both PSCs and RLEs are required to respond to any notices from the company requesting information but their obligations do not stop there. They also have a positive obligation to disclose details of any relevant interests and rights. So any individual or legal entity who meets the criteria for being registered as a PSC or RLE in a company's PSC register is under the obligation to notify the company of this fact, to provide details of their interest and the associated private details that require entry into the register. Details must be provided within one month of their interest becoming registrable. Registered PSCs or RLEs also have the ongoing obligation to notify the company when changes to their particulars or interest occur.

Sanctions for non-compliance

There are potential criminal sanctions for individuals, companies, directors, PSCs or RLEs in the form of fines or, potentially, imprisonment for failure to comply with PSC obligations. In addition to this, the company has the power to place restrictions to shares or interests held by any person or legal entity who, without a valid reason, fails to respond to its request for information. For more information on this onerous default process, see the guidance from BIS.

Typical wordings

Below is a quick reference guide to the official way of wording some of the more common statements that can be used on the PSC register. For a full list, please refer to the guidance from BIS.

The company has no PSC or registrable RLE

"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"

Unidentified PSC

"The company knows or has reasonable cause to believe that there is a registrable person in relation to the company but it has not identified the registrable person"

Unconfirmed particulars

"The company has identified a registrable person in relation to the company but all of the required particulars of that person have not been confirmed"

Taking reasonable steps

"The company has not yet completed taking reasonable steps to find out if there is anyone who is a registrable person or a registrable relevant legal entity in relation to the company"

Condition (i)

"The person holds, directly or indirectly, more than 25% but no more than 50% of the shares in the company"

"The person holds, directly or indirectly, more than 50% but less than 75% of the shares in the company"

"The person holds, directly or indirectly, 75% or more of the shares in the company"

Condition (ii)

"The person holds, directly or indirectly, more than 25% but not more than 50% of the voting rights in the company"

"The person holds, directly or indirectly, more than 50% but less than 75% of the voting rights in the company"

"The person holds, directly or indirectly, 75% or more of the voting rights in the company"

Condition (iii)

"The person holds the right, directly or indirectly, to appoint or remove a majority of the board of directors"

Condition (iv)

(This will only be applicable where a PSC or RLE does not meet one or more of conditions (i) to (iii).)

"The person has the right to exercise, or actually exercises, significant influence or control over the company"

Frequently asked questions

Why is this being introduced?

The introduction of the PSC register is one of a number of changes to the Companies Act 2006 brought about by the Small Business, Enterprise and Employment Act 2015. The aim of the Act is to create greater transparency in the ownership and control of UK companies, to help in the fight against money laundering, whilst increasing trust in UK companies.

Does my company need to have a PSC register?

All UK private companies, including companies limited by guarantee, and UK LLPs will have to keep a PSC register. Only companies that already disclose information about ownership of shares under the FCA's Disclosure and Transparency Rules (DTR5 issuers) are exempted from keeping the register.

Who can be a PSC?

A PSC can be either an individual or a UK registered company. Individuals may meet one of the conditions below through direct or indirect shareholdings. UK companies are registrable on the PSC register if they meet one of the conditions below and have a direct interest in your company.

If the direct interest lies with a company registered outside the UK, scrutiny of the full group structure is required until an individual or UK registered company can be identified as the PSC.

How do I identify a PSC?

There are five separate conditions, which are:

  • Condition 1: holds, directly or indirectly, more than 25% of the shares in the company.
  • Condition 2: holds, directly or indirectly, more than 25% of the voting rights in the company.
  • Condition 3: holds the right, directly or indirectly, to appoint or remove a majority of the board of directors of the company.
  • Condition 4: has the right to exercise, or actually exercises, significant influence or control over the company.
  • Condition 5: exercises significant influence or control over the trustees of a trust or partners of a firm, where that trust or firm is not a separate legal entity, but where those trustees or partners would otherwise meet the conditions above.

What about LLPs?

Under the LLP regulations, an individual will be a person with significant control if he:

  • Has a direct or indirect right to more than 25% of the LLP's surplus assets on a winding up;
  • Has a direct or indirect right to more than 25% of the members' voting rights;
  • Has a direct or indirect right to appoint or remove a majority of the LLP's management; or Exercises, or has the right to exercise, a significant influence over the LLP.

What if my PSC does not want their details on the public record?

Talk to us about reviewing your corporate structure or alternatively, the PSC may consider applying under the Companies House protection regime.

What information do I need?

For an individual:

  • Name
  • Service address
  • Usual country/state of residence
  • Nationality
  • Date of birth
  • Usual residential address (this will not appear on the public record)
  • Date on which the individual became registrable
  • Nature of control

For a relevant legal entity:

  • Corporate/firm name
  • Registered/principal office
  • Legal form and governing law
  • Applicable company register and number
  • Date on which the legal entity became registrable
  • Nature of control

When must my PSC register be ready?

You must have a PSC register from April 2016. From June 2016 you will have to send the PSC information annually to Companies House with your confirmation statement which replaces the annual return. The company has an ongoing obligation to maintain the register and to investigate when it believes there may have been a change in PSC.

What about non-compliance?

PSCs themselves have an obligation to notify the company within one month of becoming a PSC. They commit an offence if they fail to notify or respond to a notice from the company. In addition, the company may apply sanctions in relation to shares held by the PSC and the rights attached to those shares. Failure to comply may result in the company and its officers committing an offence.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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