Every affected UK company has to keep a Register of People with Significant Control or PSC register.
This was one of the most controversial changes introduced by the Small Business, Enterprise and Employment Act 2015.
Here though we focus on companies with simple ownership structures to provide you with help to identify your company’s PSCs and detail what information you need to include in your PSC register.
Who is a person with significant control (PSC)?
A person with significant control (PSC) is defined as an individual (whether or not their permanent home is in the UK) who meets one or more of the following five conditions in relation to a company:
An individual who holds more than 25% of shares in the company.
- An individual who holds more than 25% of voting rights in the company.
- An individual who holds the right to appoint or remove the majority of the board of directors of the company.
- An individual who has the right to exercise, or actually exercises, significant influence or control over the company.
- An individual who has the right to exercise, or actually exercises, significant influence or control of a trust or a firm, which is not a legal entity, but would satisfy one of the first four conditions if it were an individual.
If an individual meets one of the first three conditions, 4 and 5 do not to be worried about. Conditions 4 and 5 are intended to deal with much more complex company ownership structures and to keep things simple are beyond the scope of this article.
Individuals as PSCs
Here’s a couple of examples to give this some context.
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Example 1 |
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Company A, registered in the UK, is owned by 3 shareholders – individual 1 (40%), individual 2 (40%) and individual 3 (20%).Individuals 1 and 2 should be registered as PSCs of Company A as they both meet condition 1 – i.e. they both own more than 25% of the shares. If all the shares carry one vote each then they also meet condition 2. Individual 3 does not hold sufficient shares to meet either condition 1 or 2 or the the other conditions, is not therefore a PSC, and would not appear on the PSC register. |
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Example 2 |
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Company B, registered in the UK, is owned by 5 shareholders, each with 20% of the company’s shares.None of the individuals hold more than 25% of the shares and therefore do not satisfy condition 1. Assuming that each share in Company B carries one vote each, and there are no additional control conditions in the articles of association or any shareholders agreement, then conditions 2 and 3 will also not be met.Company B will therefore have no PSCs but the fact there are no PSCs must be entered on the PSC register as the PSC register can never be blank. |
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Individuals and indirect control
Conditions 1 to 3 might be met directly or indirectly. A condition is met indirectly where an individual holds their rights through a legal entity (e.g. another company) in which they hold a majority stake and that legal entity meets one of the conditions. In those circumstances it will often be the legal entity that appears on the company’s PSC register and not the individual.
Companies and other legal entities as PSCs
In many cases it may be that one or more companies, rather than individuals, hold the shares in another company and therefore meet on the five conditions. In those instances, and although a company cannot be a PSC, it’s details will be entered on the PSC register if it is a Relevant Legal Entity (RLE). A company must therefore identify both its PSCs and its registerable RLEs on its PSC register.
So what is a Relevant Legal Entity (RLE)?
- A company is an RLE if it meets one or more of the five PSC conditions and;
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- It is a UK company that keeps a PSC register; or
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- It is a DRT5 Issuer (or equivalent); or
- It’s shares are traded on a regulated market or on a specified overseas market (Israel, Japan, Switzerland or USA).
Here’s some more examples to give this context.
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Example 3 – Direct / Indirect interest & RLEs |
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Individual 1 owns 80% of the shares in Company B. Company B is a UK company which must maintain its own PSC register. Individual 1 is therefore a registerable PSC for Company B. Individual 2 does not meet any of the 5 conditions for Company B and so is not a PSC and will not appear on the PSC register.Company B owns 100% of the shares and therefore meets conditions 1 – i.e. it owns more than 25% of the shares. As it is also a UK company it is a registerable RLE in relation to Company A and must appear on Company A’s PSC register. Individual 1 is a PSC in relation to Company A but since individual 1 only holds an indirect interest in Company A through an RLE (i.e. Company B), individual A is NOT a registerable PSC in relation to Company A and will not appear on Company A’s PSC register. |
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Example 4 – Direct / Indirect interest & RLEs |
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Company B is a unlisted private company registered overseas, outside the UK. Company B is owned by individual 1, who has 80% of the shares, and individual 2 who has 20%. Company B ownes 100% of the shares of Company A.Although Company B is a PSC in relation to Company A, as it meets condition 1, it is not an RLE as it does not meet any of the conditions to become an RLE (i.e. not a UK company etc). It will therefore not appear on Company A’s PSC register.Since Company B is not an RLE we must go back further in the chain when looking at Company A’s PSC register. Individual 1 is a PSC in relation to Company A as it holds an indirect interest through Company B. Since Company B is not an RLE, individual 1 must appear on Company A’s PSC register. |
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As the complexity of a company’s structure increases so too will the complexity of creating and maintaining its PSC register.
For the vast majority of small companies though identifying their PSCs should not prove too difficult and as such we’ve chosen in this article to focus on small companies with simple ownership structures.
If you want to find out more though about PSCs and some of the complexities in relation to PSCs and RLEs in relation to more complicated company structures just go to Gov.uk.
Before You Go …
Download our FREE limited company statutory registers template and use it to create up-to-date official records for your limited company.
