As of the 30th June 2016 you will be required to submit additional information relating to People with Significant Control when incorporating a company. This guide will provide an overview of why this is required, what a Person with Significant Control is and what information needs to be supplied.
For an in-depth explanation we recommend that you read the official PSC guidance released by the government.
In July 2015 Vince Cable, Business Secretary at the time, launched the 'Transparency and Trust' discussion paper. This paper set out a number of proposals aimed at addressing opaque company ownership structures and detailed how the UK would implement its G8 commitment to a central registry of companies' beneficial owners.
The outcome of this discussion paper included proposals to proceed with several policies, including the establishing of a publicly accessible central registry of UK company beneficial ownership information.
These proposals were brought to fruition through the Small Business Enterprise and Employment Act 2015, which made certain amendments to the Companies Act 2006, with the term ‘beneficial owner’ being rethought as a ‘Person with Significant Control’ (PSC).
The implementation of a company’s requirement to retain its own register of PSCs was implemented on 6th April 2016 and the requirement for this information to be filed with the Registrar of Companies was implemented on 30th June 2016.
A PSC is any person that exerts significant influence or control over a company. This is quantified if any of the following conditions are met:
The first two points are self-explanatory, but there is an exception. If the shareholder is a nominee holding the shares on behalf of another individual then that shareholder is ‘transparent’, i.e. the ultimate beneficial owner of the shares is considered to be the PSC, not the nominee shareholder
Point 3 will apply to any shareholder that controls more than 50% of the voting rights as with a majority holding you can appoint and remove directors from the board. This qualification could also be met if there is a governing document, such as the Articles of Association, a Partnership Agreement or a Shareholders Agreement, that imparts the explicit right to appoint a majority of the board on a specific individual.
If any of points 1 through 3 apply to an individual then points 4 and 5 do NOT need to be considered.
Point 4 and 5 are a little more complicated; there is no quantifiable measure for this and it becomes more subjective. There is statutory guidance available to the meaning of ‘significant influence or control’ but in essence you are looking for people who dictate the actions of the directors or shareholders. Specific examples provided in the referenced guidance include:
3.3. A person would exercise “significant influence or control” if:
They are significantly involved in the management and direction of the company, for example:
A person, who is not a member of the board of directors, but regularly or consistently directs or influences a significant section of the board, or is regularly consulted on board decisions and whose views influence decisions made by the board
This would include a person who falls within the definition of “shadow director” set out in section 251 of the Act, but the situation is not confined to shadow directors.
Their recommendations are always or almost always followed by shareholders who hold the majority of the voting rights in the company, when they are deciding how to vote. For example:
A company founder who no longer has a significant shareholding in the company they started, but makes recommendations to the other shareholders on how to vote and those recommendations are always or almost always followed.
There are specific exclusions mentioned in the guidance, including professional advisors such as accountants and solicitors. It is also worth noting that a director is not considered to be a PSC by virtue of being a director.
If a firm or a trust meets any of points 1 to 4 above then the people that control that firm or trust must be listed as PSCs in line with point 5 above.
The above rules are reasonably straightforward to follow if all parties are individuals, but things are complicated if the company has an interested corporate party that would have qualified as a PSC had they been an individual.
If, however, the corporate entity is registered in a jurisdiction that does not have a central registry of PSCs (i.e. not the UK) then you will need to work out who the ultimate PSCs are. This will mean working back through the corporate chain until you find the controlling individuals and then ascertaining for each if they meet the qualification for a PSC.
In situations where the UK company is a 100% subsidiary of a foreign company owned by natural persons then the PSCs can be easily identified by applying the above rules to the holding company.
Where there are complicated ownership structures with multiple shareholders then consideration needs to be given to who controls each company in the chain. For example, if the 30% shareholder of a UK company was a French company that was owned in a 51:49 split between two individuals, the 51% owner of the French company would be considered a PSC of the UK company.
Even though they would not appear to be a PSC by their ultimate shareholding (51% × 30% = 15.3%), they actually are a PSC because they control a majority in the French company, thereby enabling him to exert control over the entire 30% share in the UK company.
Where a portion of the shares of a company are held by joint shareholders then each shareholder is deemed to hold the entire shareholding in their own right for PSC purposes, i.e. if two individuals together hold a 30% stake in a company, they are both considered PSCs – you cannot dismiss them as each only holding a 15% stake.
The same rule generally applies to the trustees of a trust – each trustee is considered to be a PSC if the trust itself would have qualified as a PSC had it been a natural person.
As well as Individuals and RLEs, there are certain other legal entities that may be considered PSCs (or Other Registrable Persons (ORPs)).
The official government guidance provides a non-exhaustive list for these as follows:
7.4.10 – The law makes special provision where a company is owned or controlled by an ‘other registrable person’ such as:
These entities may be registered directly and you do not need to identify any underlying PSCs.
Sometimes a group of shareholders may always vote in the same way, for example if they are a family group. In this instance consideration should be given to if there is a single individual that controls this voting bloc, or if each individual in the bloc has joint control of over 25% of the shares/votes and should be treated in the same way as a joint shareholder.
For an individual that is a PSC the following details are required:
For RLEs the following details are required:
For ORPs the following details are required:
For all types of PSC above it is also required to note the date on which they became a PSC of the company and to note the nature of their control in accordance with the five qualifications mentioned above.
For PSCs that are PSCs by virtue of holding shares or voting rights you must also provide a banding for what % of those shares or voting rights they control. The bandings are:
If a PSC is a PSC by virtue of controlling a firm or a trust that meets the qualifications of a PSC then Companies House must be informed that they meet their PSC qualification through such firm or trust.
It is acceptable that a company may not have any PSCs, for example if a company has four equal shareholders then none of them meet the 25% qualification, and, assuming there is no other significant influence or control, the company does not have any PSCs.
It is also possible that in some cases you may not have completed investigations into who the PSCs are.
When you come to file your next Annual Confirmation Statement then the PSCs on file at Companies House should be reassessed.
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