If your company has had a reshuffle, it is best to review your things like shareholding and voting rights to see whether people with significant control (PSC) have changed, as such changes need reporting to Companies House.
A person with significant control
A person of significant control sometimes referred to as a "beneficial owner", is anyone who can exercise considerable control or is significantly involved with the decision-making in your company. They have more than 25% of shares or voting rights or the power to remove and appoint the majority of the board of directors.
Specified conditions for a PSC
Part 1 of Schedule 1A of the Companies Act 2006 outlines specific conditions which amount to a person having significant control. If one of these conditions is met, the individual or company must be registered on the PSC register.
Condition 1 - Holding share
A holding share refers to the percentage of shares the individual or company has.
Sara holds 60% in XYZ Ltd
Lucy holds 25% in XYZ Ltd
Jonah holds 15% in XYZ Ltd
Only Sara would be classed as a PSC.
If four people hold a 25% share in a company, they would not need to go on the PSC register as none of them hold more than 25% share.
Condition 2 - Voting rights
A PSC is also anyone who controls more than 25% of your company's voting rights and must also go on the PSC register.
In Example 1 above, if both Lucy and Jonah had an agreement to act together, they would have a 40% share and voting right, so they both would be classed as PSCs and would need to go on the register.
Condition 3 - Right to exercise significant influence or control
It is possible for an individual not to meet any of the above conditions but still be classed as a PSC. If someone has the right to overrule any decision, they must be registered on the PSC register.
The right to exercise significant influence or control can arise in a variety of circumstances, such as the provisions of a company’s constitution, the rights attached to the shares which a person holds or other agreements.
A person would exercise significant influence if they are materially involved in the management and direction of the company or their recommendations are consistently followed by shareholders who have a majority of voting rights.
This condition might be harder to prove as the wording is ambiguous, and each scenario can differ from company to company. However, some examples of how an individual can exert control or influence are listed below:
- deciding on or changing the businesses activities
- deciding on the profit sharing or bonus incentives for directors
- A founding member no longer has shares or voting rights, yet the board of directors consistently follows their recommendations.
Condition 4 - Right to remove and appoint directors
An individual can be classed as a PSC even if they have no voting right or shareholding but have the right to appoint or remove the majority of the directors. This provision can be found in articles of association.
Condition 5 - Trusts and partnerships
This condition applies where a trust or partnership meets one of the specified conditions for becoming a PSC of a business, and an individual (other than the trustees or members of the firm) has considerable influence or control over the trust or firm's operations.
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The UK Government introduced new rules in 2016 requiring companies to keep a PSC register. UK companies must hold information on their PSCs, those with beneficial ownership, and submit this information to Companies House.
The register on Companies House is accessible to the public, and you must also keep a record at the business's registered office.
Which companies need to maintain a PSC register?
All UK limited companies, limited liability partnerships (LLPs), community interest companies (CICs), public limited companies and unlimited companies must all create and update a PSC register.
Why must companies keep a register of PSC?
PSC register was introduced to increase the transparency of UK companies, help investors make better-informed decisions and help law enforcement agencies tackle criminal activity such as preventing money laundering and terrorism financing.
A government study in 2019 found that some businesses used the register to look up information about other businesses and found this useful. The study also found that law agencies used the register to inform of criminal activity.
You must record the following details of the people who own and control your company.
- individuals name
- date of birth
- nationality and residence
- correspondence address
- residential address (not available to the public)
- which specified significant control conditions are met
- the date they became a PSC
- the date you entered them into your PSC register
Registering on Companies House
You can inform HMRC of any changes on the Companies House website, or you can do it by post by filling out a PSC04 form and sending it via post.
The company must take reasonable steps to identify and update any registrable PSC. The register can't be left blank. The following wording can be used "The company has taken reasonable steps to establish that there is no registrable person concerning the company”.
You have 14 days to make any changes to your PSC register and a further 14 days to inform Companies House. You can inform the government of any changes to your limited company via the Companies House website.
Your company's PSC register can be updated annually as part of the confirmation statement.
Failure to register a PSC
Failure to keep accurate records or inform Companies House of changes could result in a fine or imprisonment of up to 2 years.
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The opinions on this page are for general information purposes only and do not constitute legal advice on which you should rely.