The Person of Significant Control Register

Who is it that controls and benefits from UK companies? To help answer this question, the government has introduced the ‘People with Significant Control’ (PSC) register. For businesses, it means a new record-keeping requirement — along with a change to your company’s filing requirements. To help you make sense of these changes, and to stay on the right side of the law, here’s what you need to know about the PSC register.

The changes at a glance

Since April 2016, all unlisted companies and Limited Liability Partnerships (LLPs) are required to keep an internal register of persons with significant control. From 30th June, companies will be required to submit this information to Companies House as part of their annual filing requirements. It will be done via the new ‘Confirmation Statement’, which is set to replace the current Annual Return.

Why have the changes been introduced?

Transparency is a hot topic, whether it’s to combat tax evasion, to prevent the proceeds of crime from being laundered, or even to stop the funding of terrorism. A list of directors only tells you so much about a company: to uncover the complete picture, you need to look not just at who owns the company on paper — but also who benefits from it in practice.

For companies listed on the London Stock Exchange or Alternative Investments Market, information about significant shareholders is already in the public domain. For private companies, it’s currently a lot harder to determine who exactly calls the shots and who receives the profits. So the new rules are designed to extend the principle of transparency to smaller, privately owned companies.

After 30th June, companies will gradually start feeding through their PSC information to Companies House as part of their annual requirements. The idea is that, ultimately, this information will be available for the public to view via a searchable database.

Does this mean more red tape?

Being asked to ‘maintain a register of persons of significant control’ sounds daunting. But, especially for small businesses with uncomplicated structures, it’s actually quite simple.

On referring to the government’s guidance, most small business owners should be able to recognise instantly who is — and who isn’t — a PSC. It’s then just a matter of recording certain information about these PSCs in a single document (your register). This information and any subsequent changes to your PSC register is submitted to Companies House as part of youIntroducing the People with Significant Control register: what does it mean for my business?

How to determine who is a PSC

Read the government’s statutory guidance as a starting point. A PSC will meet one or more of these five criteria:

  1. Directly or indirectly holds or controls more than 25% of the company’s shares

  2. Directly or indirectly holds more than 25% of the company’s shareholder rights

  3. An individual who has the right to appoint or remove a majority of the company’s board members

  4. An individual who holds ‘significant influence or control’ over the company

  5. An individual who has ‘significant influence or control’ over a trust, partnership or other legal entity that has a controlling interest in the company

For these latter ‘significant influence or control’ criteria, the statutory guidance gives some useful examples on who might be included and who is exempt. For instance, your lawyer or tax advisor acting in their professional capacity wouldn’t be included. However, someone who has the absolute decision-making rights over queries relating to the running of the company would be included.

Here are some examples

  • You and one other director are 50/50 shareholders in the company: you are both PSCs.

  • You and three other individuals each own 25% of the company’s shares. No party has more than a 25% stake — therefore no party is a PSC.

  • You and three other shareholders each own 25% of the company’s shares. It’s written in your company’s constitution that one of you has the right to hire and fire the CEO. That individual is a PSC.

  • You’ve taken an individual investor on board who now holds 10% of the company’s shares. It’s agreed that this individual has an absolute right to make decisions relating to borrowing additional money from lenders. That investor is a PSC.  

Maintaining your PSC register

The register guidance sets out the information you will need to record for each PSC. This includes name, date of birth, nationality, service and residential addresses, the date the individual became a PSC, which of the five conditions for being a PSC the individual meets, and the quantification of the interest where relevant (e.g. the percentage shareholding). Before you enter their details in your register however, make sure you get the PSC to confirm them.

You will be asked to submit this information to Companies House as part of your Annual Confirmation Statement (the upcoming replacement for the Annual Return) after 30th June.

What next?