People of Significant Control – Part 1
A recent query from Companies House as regards the people of significant control (“PSCs”) of a client company prompted a useful recap of the PSC Rules and it was considered useful to share.
Introduced in 2016, the PSC regime aimed to enhance the transparency of the beneficial ownership of UK companies and now applies to a number of entities including most commonly, all UK incorporated companies and limited liability partnerships but also AIM companies and other general partnerships, unless they are exempt.
A PSC is an individual (or a legal entity) who meets 1 or more of the following PSC conditions:-
- Condition 1 – directly or indirectly holds more than 25% of shares.
- Condition 2 – directly or indirectly holds more than 25% of the voting rights.
- Condition 3 – directly or indirectly holds the right to appoint or remove a majority of directors.
- Condition 4 – otherwise has the right to exercise significant influence or control.
- Condition 5 – having the right to exercise or actually exercises significant influence or control over the activities of a trust or firm which is not a legal entity but would satisfy any 1 of the first 4 conditions if they were an individual.
This article covers some general information which is useful to note when dealing with PSCs. Part 2 shall follow shortly and will consider PSC conditions 1, 2 and 3 in more detail and the third and final part shall cover PSC conditions 4 and 5.
All entities to which the PSC Rules apply must maintain a PSC Register and also keep Companies House up to date with PSC information. Any changes to PSC information needs to be filed at Companies House within 14 days of the change. The PSC Register and note at Companies House cannot be blank therefore, whilst you are investigating, your PSC Register should state something to that effect. Equally, if following investigation it transpires that there are no PSCs, a statement to this effect will need to be included on the PSC Register and noted at Companies House. Companies House hold a list of style statements which can be used or adapted to reflect the position.
As mentioned, a PSC may be an individual or a legal entity; a relevant legal entity (“RLE”). If the RLE meets any 1 or more of the PSC conditions then it shall need to be noted as a PSC if it is (i) relevant; and (ii) registerable.
A RLE is relevant if it meets any of the PSC conditions and either, (i) must maintain its own PSC Register; or (ii) has voting rights admitted to certain regulated markets. A RLE is registerable if it is the first legal entity in the ownership chain. If the legal entity in question is relevant and registerable it has to be noted on the PSC Register and at Companies House but there is no need to look any further. Only when that legal entity is not relevant or registerable do you need to look beyond it to the shareholders.
There is an obligation to take reasonable steps to identify any PSCs. Contact should be made with any potential PSCs to confirm whether they meet any of the PSC conditions. If a potential PSC has been identified but you do not have sufficient information, a statutory notice should be served on them seeking to confirm and request certain information. If you are unable to identify your PSCs but you think that your company does in fact have them, consider serving notice on anyone who may have information on them such as lawyers, accountants or bankers. These statutory notices require a response within 1 month and anyone who fails to respond commits a criminal offence.
Part 2 of the series will follow shortly and shall cover some more detail of PSC conditions 1, 2 and 3. If you have any queries in the meantime however, please do not hesitate to get in touch with Kirstin Ejsmont at email@example.com.