People with Significant Control – who qualifies?

Since April 2016, as part of the Government’s commitment to greater corporate transparency, private UK companies and limited liability partnerships (LLPs) have had to create and maintain a register of people with significant control (PSC). People included on this PSC register are subject to certain disclosure requirements. 

The introduction of the PSC Register will help combat tax evasion, money laundering and terrorist financing by allowing a full picture of both the legal and beneficial ownership of businesses to be created. All UK companies must comply to the rules, with a few exceptions including sole traders, limited partnerships and ordinary partnerships.  

Who is a PSC?

A PSC can be either an individual or a UK registered company who meets one of five conditions as set out by legislation. The first four of which are:

1. Persons who hold more than 25% of the company’s shares; or
2. Persons who hold more than 25% of the company’s voting rights; or
3. Persons with the right to appoint or remove a majority of the directors; or
4. Persons with the right to exercise, or who actually exercise, significant control over the company.

The fifth condition covers trusts or firms (which are not defined as separate legal persons) where there is a chain of ownership that satisfies one of the first four conditions. The person with significant control of the trust or firm in this instance will be a PSC under this overarching fifth condition. In the case of a trust, the person with significant control will usually be the trustee. However, it may be the case that beneficiaries are considered to have significant control in certain situations. In this way, the fifth condition has lifted the veil of control relationships within UK companies and the information surrounding that control that is publically available.

Where a UK registered company (which is defined as a separate legal person in contrast to a trust or a firm) meets one of the conditions for a PSC it will be a relevant legal entity. However, a non-UK registered company cannot be included on a company’s PSC register as a relevant legal entity. In this instance, the company must look through the layers of control to identify the individual(s) or UK registered company who have significant control of the company.

Until June 2016, only details of immediate shareholdings were filed as part of the company’s annual return. However, this provided limited information on the controlling interests of the company as in many cases the immediate legal owners of a company may differ vastly from its significant controllers. The annual return has now been replaced with a confirmation statement, to be filed annually with Companies House. The confirmation statement includes a requirement to file details of the PSC register and as such, details of significant controllers of UK companies will now be publically available. As a result, the new confirmation statement makes for a much more telling, and indeed interesting, insight into the corporate workings of UK companies than was previously available under the old regime.

Following the uncertainty of Brexit, the issue of corporate transparency has found a new importance. Any firms yet to register are encouraged to contact their business advisory service to ensure they know what it takes to qualify and get the best advice.