Persons of Significant Control – are you compliant?

Since June 2017 it has been a legal requirement for all companies to take reasonable steps to identify any persons with significant control (‘PSC’), as well as maintaining their own internal PSC register. Further to a recent update, it is also now a requirement for companies to file this information with Companies House.

There has been some confusion over this requirement since its introduction, and Companies House are now looking to crack down on companies who have not filed the information correctly, or in some cases, at all. To help you understand if you are complying with your obligations and to avoid penalties for incompliance, we have answered some common questions in line with the most recent updates below.

1. Why was the PSC register introduced and what does it do?

The PSC register was introduced following increased media pressure for greater corporate transparency, and a need for increased confidence in businesses.

The requirement to complete this register therefore increases transparency within businesses, as anyone can search Companies House and ascertain who has significant control over a particular company.

2. What is a PSC and how do you identify them?

A PSC is a person or relevant legal entity (for example a limited company) who is registrable.

To identify a PSC you must go through the below checklist:

(a) You would first of all consider whether a person or relevant legal entity:
i. holds, directly or indirectly, more than 25% of the shares;
ii. holds, directly or indirectly, more than 25% of the voting rights; and/or
iii. holds the right, directly or indirectly, to appoint or remove a majority of directors.

(b) If none of the above are satisfied, you would then consider if the person or relevant legal entity:
i. otherwise has the right to exercise, or actually exercises, significant influence or control over the company; and/or
ii. has the right to exercise, or actually exercises, significant influence or control over the activities of a trust or firm which is
not a legal person, the trustees or members of which would satisfy any of the four conditions above.
An example of (b)(i) and (b)(ii) will include anyone who is significantly involved in the management and direction of the company whether that be a lawyer, accountant, or anyone whose recommendations are followed by the shareholders in a vote.

3. What entities does it apply to?

It applies to private companies limited by shares, companies limited by guarantee, LLPs, dormant companies, community interest companies and Societas Europaea.

4. Whose duty is it to identify a PSC?

Reasonable steps must be taken to identify the PSC, and the obligation to do so is on the PSC, others who have information about that PSC, and the relevant legal entity (within scope).

5. Where should I record this information and how do I do it?

As it is a criminal offence if you fail to record this information properly, it is recommended that you instruct a Solicitor to review and record the information on your behalf using the relevant form.

6. What happens if the information changes?

You are under an obligation to update the information with Companies House, as well as your internal registers, within 14 days of any change.

We understand that the requirements explained in this blog can be both daunting and confusing, and we are happy to guide you through the process or complete the register for you. If this is something you might be interested in, or if you have any further questions, please contact a member of the team on corporate@mlplaw.co.uk or call 0161 926 9969, and they will be able to advise you further.