People of Significant Control – Part 3
This third and final instalment shall consider PSC conditions 4 and 5. Generally speaking, PSC conditions 4 and 5 shall only be considered if the first 3 do not apply.
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.
What is meant by “significant influence or control” is key to understanding these PSC conditions. Influence and control are alternatives. Generally, control is where someone can direct the activities of an entity and influence is where a person can ensure that the entity adopts desired activities.
There is however no exhaustive list of what significant influence or control means. Instead, statutory guidance provides examples of situations in which a person will be deemed to have the right to exercise or actually exercises influence or control. The same statutory guidance also lists various exemptions. Sometimes these examples and exemptions will be clear whereas on other occasions, it will be a matter of judgement. What should be noted is that there does not necessarily have to be any economic benefit.
Examples of scenarios where one may be deemed to have significant influence or control; someone with absolute veto rights over business plans, company or partnership documents and agreements, appointments to the board and borrowings; someone who is regularly consulted on day-to-day management, whether a director or not and any recommendations made are generally followed; and a person who owns assets or holds close relationships within the company or with key players, both of which are exploited to influence decisions.
With particular regard to PSC condition 5, someone who has the right to appoint or remove any trustees, partners or members, direct the distribution of funds, assets and investments, amend the trust or partnership deed as well as revoke the trust or terminate the partnership, may be considered persons who have significant influence and control.
There are certain individuals who may offer advice but are not deemed to have significant control or influence for example; professional advisers such as lawyers, accountants, management consultants, financial and tax advisers; customers and suppliers; lenders; and persons acting within the course of their employment.
As mentioned in Part 1 of this short series, the PSC regime was introduced to seek to enhance transparency of the beneficial ownership of UK companies and other entities to which the PSC regime applies. There is no one size fits all and it will be necessary to consider each entity and the prospect of their PSCs on a case by case basis.
Experience has indicated that Companies House do make spot checks to ensure that PSC information is up to date therefore ensure that this is the case to avoid any unnecessary discussions with them about this.
As previously mentioned, determining PSCs may be straightforward for some entities but more complex for others who have a more complicated ownership structure. We are more than happy to answer any questions that you may have on the PSC regime in general and assist with determining your entities PSCs should you require such assistance. In the first instance, please contact Kirstin Ejsmont at email@example.com or call 01224 632464 and ask for someone within the commercial department.