People with significant control (PSCs) are individuals or legal entities who own a certain percentage of a company and/or have the power to control or influence particular aspects of a business. In most cases, it’s easy to identify PSCs, but sometimes it’s not immediately evident.
Limited companies and some other types of business structures are legally required to determine who their PSCs are, record the details of each person in the firm’s PSC register, and ensure this information is filed and kept up to date at Companies House.
How to identify PSCs in a company
To be regarded as a PSC, a person must satisfy one or more of the following five conditions:
- hold more than 25% of the company’s shares
- hold more than 25% of the company’s voting rights
- have the right to appoint and remove the majority of the company’s directors
- have the right or power to exercise (whether directly or indirectly) a considerable degree of influence or control over the company
- have the right or power to exercise (whether directly or indirectly) a considerable degree of influence or control over the activities of a trust or firm that would otherwise satisfy one of the other four conditions if it was a legal person
The first three conditions are pretty straightforward. You can usually work out if an individual meets any of them by looking at the company’s register of members and/or reviewing the articles of association. However, conditions 4 and 5 cover a more broad range of scenarios, so it can be more challenging to identify individuals to whom these criteria apply.
For example, a person may hold a right that constitutes significant influence or control but not actually exercises that right. Conversely, a person may have the power to influence the decisions of the directors or shareholders without having any official right to do so. In each case, the individual would normally be classed as a PSC and should be registered as such.
Excepted roles and relationships
There are excepted roles and relationships that do not result in those individuals being classed as a PSC. These include people who:
- provide advice or direction to the company in a professional capacity – lawyers, accountants, financial advisors, auditors, investment managers, management consultants
- deal with the company under a third-party agreement – suppliers, clients/customers, lenders
- exercise specific functions under an enactment – regulators, liquidators, receivers
- are employees or company officers acting in the course of their employment or appointment – employees, workers, directors, company secretaries, CEOs of firms that have significant influence or control over the company (e.g., corporate director companies)
- make recommendations to shareholders on a one-off occasion on any issue that has been put to a shareholder vote
Who can be a person with significant control?
Almost any individual, whether a natural person or non-human legal entity, in any country, can be a person with significant control, including:
- individual people of any nationality
- limited and unlimited companies, limited partnerships, and limited liability partnerships (LLPs)
- charities and non-profit organisations
- local authorities and government bodies
- governments and government departments
- international organisations
PSC legislation does not impose a minimum age requirement for people with significant control.
Can a disqualified director be registered as a PSC?
Disqualified directors are prohibited from forming or running a company or instructing a third party to form or run a company on their behalf and under their direction. However, they are allowed to own shares in a company, which has resulted in a grey area of the law with regards to disqualified directors being PSCs in a company.
Unless the court has granted permission to act in such capacity, disqualified directors who own more than 25% of the shares in a company and/or meet any of the other qualifying conditions of a PSC should exercise extreme caution to avoid breaching the terms of their disqualification order.
What does ‘significant influence or control’ mean?
In the context of PSCs, the term ‘significant influence or control’ refers to the type of power that a person has over a company’s activities.
- ‘Control’ – the person has the authority and power to direct the activities of the business
- ‘Significant influence’ – the person can ensure that the business generally adopts the activities they desire
Significant influence and control can manifest in a variety of ways. Below, we provide some examples of what is meant by this ambiguous terminology.
- A person has absolute rights to make decisions on the running of the business, for example, relating to:
- adopting or altering the company’s business plan
- changing the nature of the company’s business activities
- making additional borrowing from lenders
- appointing or removing the CEO
- establishing or altering any profit-sharing, bonus, or other incentive schemes of any nature for the company’s directors or employees
- A person has absolute veto rights over any decisions related to the running of the business
- A person holds absolute veto rights over the appointment of the majority of directors who hold the majority of the voting rights at board meetings
- A person is significantly involved in the management and direction of the company, for example:
- a person who is not a director but who consistently or regularly directs or influences a significant number of directors
- A person whose recommendations are always, or almost always, followed by shareholders with majority voting rights when they are deciding how to vote, for example:
- a founding member of the company who no longer holds a significant percentage of shares or voting rights but whose recommendations to other shareholders are always, or almost always, followed
Which types of companies have PSCs?
The following types of companies must identify people with significant control and record their details in a PSC register:
- Private companies limited by shares
- Private companies limited by guarantee
- Some PLCs
- Limited liability partnerships (LLPs)
- Scottish limited partnerships (ESPs)
- General Scottish partnerships (only where all the partners are corporate bodies)
- Unlimited companies
- Societates Europaeae (SEs)
- Community interest companies (CICs), whether registered as limited by shares or limited by guarantee
Companies, SEs, and LLPs are required to keep their own PSC register. Eligible Scottish partnerships (ESPs, and general Scottish partnerships with solely corporate partners) do not have to keep a PSC register, but they must deliver PSC information to Companies House to be disclosed on the central register of companies.
Further information on PSC requirements can be found in the PSC guidance from GOV.UK and the following legislation:
- Companies Act 2006
- The Register of People with Significant Control Regulations 2016
- Limited Liability Partnership (Register of People with Significant Control) Regulations 2016
Registering people with significant control in a company
When PSCs have been identified, their details must be recorded in the company’s statutory PSC register.
This information must also be sent to Companies House, where it is recorded and disclosed on the central register of companies, which is available to the public online.
Any changes to the companies PSCs should be immediately updated on the statutory PSC register and reported to Companies House on the next confirmation statement.