Persons with Significant Control

One of the main objectives of Companies House’s (CH) business plan for 2018-2019 is corporate transparency. At the heart of CH’s business plan is the proper identification and accurate presentation of information relating to Persons with Significant Control (PSCs). As CH states “Over 98% of companies have provided information regarding their PSCs. This is a great success. However, our analysis of the data submitted has identified areas where improvements can be made. […] We will develop data and intelligence sharing getaways with law enforcement and other government departments to support this work further. In particular, we will work with The Insolvency Service Criminal enforcement team to investigate non-compliance”.

Persons with significant control

In most cases, especially where small family businesses are concerned, identifying who are the people that have significant control over the company will be easy. Usually it will be the small number of shareholders that hold the majority of the shares in the company. Most likely these are the same people who incorporated the company and are still running the family business. However, things can become complicated when, for example, shareholdings change hands and new shareholders enter the business or when a person holds shares on behalf of a trust.

Identifying the relevant PSCs can also be difficult in larger corporations where the major shareholders are often other limited companies that themselves are wholly owned by other limited companies and so on. Thus, discovering who the PSCs are could become a tedious and complex exercise. Nevertheless, it is a requirement that the company keeps an up-to-date and accurate PSCs’ register. Failure to produce, keep and maintain a PSCs’ register may be an offence by the company and every officer in default.

An individual or relevant legal entity has to meet one or more of the five specified conditions set out in section 790C (2) of Companies Act 2006 (CA 2006) to be considered a PSC. The directors have to take appropriate steps to identify who these people are and update the company’s PSCs’ register. In summary, the five conditions are:

1. that the person holds directly or indirectly, more than 25% of the shares in the company;
2. that the person holds, directly or indirectly, more than 25% of the voting rights in the company;
3. that the person holds the right, directly or indirectly, to appoint or remove a majority of the directors in the company;
4. that the person has the right to exercise, or actually exercises, significant influence or control over the company; and
5. that the person has the right to exercise, or actually exercises, significant control or influence over the activities of a trust or firm, that, in each case, does not have legal personality under its governing law, where the trustees or members of that trust or firm meet any of the other four conditions (in their capacity as such) in relation to the company, or would do so if they were individuals.

A company must first identify if any PSCs exist and then record both the extent of that person’s control over the company and the nature of that control, by explaining which conditions are met. However, if any one or more of the first three conditions are met, it is not necessary to state if the fourth and/or fifth conditions are also met.

A relevant legal entity will be a PSC and therefore will have to be registered on the PSCs’ register if it satisfies all of the following conditions:

• it must be a legal entity for the purposes of the PSC regime (in brief, a corporate body or a firm that is a legal person under the law by which it is governed);
• it would meet one or more of the specified conditions if it was an individual; and
• it must be subject to its own disclosure requirements.

Contact

Are you uncertain about the PSC regime? Do you know what steps you need to take to identify the individuals / relevant legal entities that need to be registered as PSCs? Are you, simply, not sure how to prepare and/or maintain a PSCs’ register? Our corporate solicitors can help. Please contact Keith Kennedy or Niki Polymeridou on 0161 785 3500 or email them at keith.kennedy@pearsonlegal.co.uk or niki.polymeridou@pearsonlegal.co.uk

Subscribe to our newsletter

Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.

This blog was posted some time ago and its contents may now be out of date. For the latest legal position relating to these issues, get in touch with the author - or make an enquiry now.