People with Significant Control – Who are they?
Published 22 January 2020. By Wattey Kemnay
Since 30 June 2016, UK companies, Societates Europaeae (SEs) and limited liability partnerships (LLPs) are required to identify and record the people who own or control their company. Companies, SEs and LLPs will need to keep a PSC register, which includes information about the individuals who own or control companies including their name, month and year of birth, nationality, and details of their interest in the company. The PSC information must be also be filed with the central public register at Companies House.
The purpose of the register of people with significant control is to improve corporate trust and transparency in the UK by making it clear to enforcement agencies, other businesses and the general public who ultimately owns and controls UK companies.
The legislation sets out five specified conditions by which a person may have significant control over a company if it:
(i) holds, directly or indirectly, more than 25% by nominal value of the company’s shares;
(ii) is entitled, directly or indirectly, to exercise more than 25% of the voting rights of the company;
(iii) may, directly or indirectly, appoint or remove a majority of the board of directors of the company;
(iv) has the right to exercise or actually exercises “significant influence or control” over the company; or
(v) has the right to exercise or actually exercises “significant influence or control” over a trust or firm which is not a legal entity but which itself satisfies one of the above conditions.
The company’s PSC register should never be blank; if there are no PSCs or information is still being sought, this fact must be recorded. The regime also seeks to identify the nature and extent of control and there are detailed provisions on what information is required in this respect. Breach of these provisions by the officers of the company is a criminal offence with the sanction of fines or imprisonment.
Persons receiving notices from the company outlined above are required to respond appropriately and failure to respond appropriately following a bona fide request is an offence. There is an exception for legally privileged information.
The company is also required to file the information on significant controllers with Companies House within 14 days after any change in the company’s PSC register.
However, it is not always straightforward to determine who has significant control over your company in certain complex cases. We recently assisted a UK company in complying with their obligations under the PSC regulations. In this particular case, there was a trust arrangement involving a non-UK trust, which directly holds shares in a UK company. We had to look beyond the immediate trust arrangement and had determined that there are individuals of UK nationalities who have the right to exercise significant control over the non-UK trust and which in turn, determines how such trust makes decisions in respect of the UK company.
Recently, the Joint Law Society, the City of London Law Society and the Department for Business, Energy and Industrial Strategy (BEIS) have issued a helpful Q&A on the PSC Register which provides guidance on how to correctly determine a person with significant control in complex scenarios. The Q&A can be found here.
This article is for general guidance only and should not be regarded as a substitute for professional legal advice.