A “person with significant control”, also referred to as a “beneficial owner”, is an individual who owns or controls a company. UK companies are legally required to produce, keep and maintain a PSC register. The PSC register constitutes one of the statutory registers under the Companies Act 2006. In this article, we will look at who can be a PSC, how to register a PSC, how to record details of PSCs, and what happens if you fail to meet the PSC requirements.
The law on persons with significant control
Part 21A and Schedule 1A to the CA 2006 requires that companies produce, keep and maintain a dedicated PSC register and make this available for inspection at the registered or SAIL address. Anyone who falls within the scope of a PSC, regardless of how they hold significant control over a company, is potentially registrable. Companies are also required to provide the details of PSCs to Companies House as part of the incorporation process and advise them of any changes during the life of the company.
Most importantly, the law states that companies deemed to be within scope are required to take “reasonable steps” to identify all individuals and legal entities with significant control over the company by referring to the five “specified conditions” as explained below. It is important to note that even though the law imposes an obligation on companies to maintain a PSC register, any breach of these requirements may constitute an offence both by the company and all company officers who do not comply.
How to identify persons with significant control
The key questions to consider when identifying persons with significant control are as follows:
1. Is your company compelled to maintain a PSC register?
In accordance with section 790B of the CA 2006, your company must maintain a PSC register if it was registered in the UK and falls within one of the following types:
- A private company limited by shares or by guarantee.
- A public company limited by shares or by guarantee that does not fall within any of the exceptions set out in section 790B(1) of the CA 2006.
- An unlimited company
- A Societas Europaea
- An unregistered company
This includes companies that are currently dormant, Community Interest Companies (CICs), and charitable companies.
Overseas companies and entities, open-ended investment companies, charitable incorporated organisations, and charity trustees incorporated as a body corporate do not need to maintain a PSC.
2. Does a person in the company meet one or more of the “specified conditions”?
Paragraph 1 of Schedule 1A to the CA 2006 provides that, for an individual to qualify as a PSC, they must meet one or more of the following five specified conditions in relation to a company:
- Hold, directly or indirectly, more than 25% of the shares in the company.
- Hold, directly or indirectly, more than 25% of the voting rights of the company.
- Hold the right, directly or indirectly, to appoint or remove a majority of the company’s directors.
- Have the right to exercise, or actually exercises, significant influence or control over the company, or
- Have the right to exercise significant influence or control over a trust or firm where the trustees or members meet any of the other conditions.
The fifth specified condition will only be relevant where a trust or a firm is identified in the chain of ownership of the company in question. The most common examples are private equity investments made through a fund formed as a limited partnership or a trust used in a holding structure for a family business.
If a person meets one or more of the first three conditions, it is not normally necessary to consider whether or not they meet condition four or five.
Can a company or other legal entity meet any of the five specified conditions?
A relevant legal entity (RLE) can be registered as a PSC, provided that it:
- Would meet one or more of the specified conditions if it was a person, and
- It is a UK-based company or legal entity.
Overseas companies are not normally considered RLEs in relation to UK companies, however, there are exceptions for particular overseas organisations listed on certain foreign exchanges. If one or more of the specified conditions is met by an overseas company, the person registering the PSC must find out if there is a person holding a direct or indirect majority stake in the overseas organisation. If so, that person is registrable in relation to the UK company.
What details are needed when completing the PSC register?
The PSC register should include the details of each PSC who is considered a registrable person within the meaning of Part 21A of the CA 2006. For individuals, the details to be included on the register include their:
- Date of birth
- Country of residence
- Service address
- Home address (this will not be publicly available)
- The date they became a PSC of the company
- The date they were included on the PSC register, and
- Which specified conditions of control are met (see above)
Where a PSC is an entity to be treated as an individual for the purposes of Part 21A, the name, principal office, legal form, and governing law must be included on the register. When registering an RLE as a PSC, the corporate name, registered or principal office address, legal form, governing law, and company registration details must be included.
It is important to ensure that PSC information is kept up to date both on your register and with Companies House. Changes to PSC details should be made within 14 days of the change on the Companies House website.
Instances where not enough information exists to complete the PSC register
The PSC register must never be left blank. If a PSC has not yet been identified, the below statement must be inserted:
“The company knows or has reasonable cause to believe that there is a registrable person in relation to the company, but it has not identified the registrable person.”
In situations where the company has not yet confirmed the required particulars of a registrable PSC, the below statement must be added to the register:
“The company has identified a registrable person in relation to the company, but all of the required particulars of that person have not been confirmed.”
If investigations are ongoing to establish who the PSC is, the following official wording must be inserted:
“The company has not yet completed taking reasonable steps to find out if there is anyone who is a registrable person or a registrable relevant legal entity in relation to the company”.
If a company has completed its investigations and decided no person or legal entity is registrable, the register must state that:
“The company knows or has reasonable cause to believe that there is no registrable person or registrable relevant legal entity in relation to the company”.
Taking reasonable steps to find a PSC or registrable RLE
If you are a director, secretary, designated member, or if you are acting for a company, you are legally required to take reasonable steps to find a PSC or registerable RLE. Failure to take reasonable steps may constitute a criminal offence. This means that you should consider the following:
- All of the documents and information already available to you to identify if your company might have a PSC – including your register of members, articles of association and statement of capital to see who holds the requisite proportion of shares.
- Any interests in your company held by individuals, legal entities and trusts or firms.
- Evidence of joint arrangements or evidence of rights held through means that might ultimately be controlled by the same individual.
If you identify a PSC or RLE, you must then take steps to gather all of the information necessary to complete the PSC register by serving notice on the individual or legal entity by post or email. If a PSC repeatedly fails to respond to your requests for information, you may need to consider imposing restrictions on their shares or rights to vote.
The law is clear that any failure of a person or entity you have identified as a PSC to respond to a notice to provide the necessary accurate information within one calendar month is committing a criminal offence. This may result in a prison sentence, a fine, or both. If you are required to compile a PSC register or respond to a request for details, it is vital that you take the matter extremely seriously. If you are unsure of your legal obligations, always seek the guidance of a specialist in company law who can assist you.
Uniwide Formations specialise in UK company formations and incorporation. Our highly knowledgeable company formation specialists can handle any aspect of your company’s registration with Companies House. We will also ensure that your PSCs are correctly registered as part of the company incorporation process.