Controlling Influence

From 6 April 2016 most UK companies will need to maintain a register (PSC Register) of those people who have significant control over the company. 

• A person with significant control over the company (PSC) is an individual who meets at least one of the following conditions:
  • directly or indirectly holds more than 25% of the shares or voting rights in a company;
  • directly or indirectly holds the right to appoint or remove the majority of the board of directors of the company;
  • actually exercises, or has the right to exercise significant influence or control over:
    • the company; or
    • any trust or firm (which is not a legal entity) which has significant control (under one of the above conditions) over the company.
• Guidance on the meaning of “significant influence or control” suggests that a person has:
  • “control” if he has the power to direct the policies and activities of the company, trust or firm
  • “significant influence” if he can ensure that the company, trust or firm adopts policies or activities which he desires.
• A person may have the right to exercise significant influence or control where, for example, he holds:
  • absolute decision or veto rights (unless those veto rights are to protect a minority interest) over decisions related to the running of the business of the company such as adopting or amending the company’s business plan; or
  • absolute veto rights over the appointment of the majority of directors.
• A person may actually exercise significant influence or control where, for example:
  • he is not on the board but is regularly consulted about board decisions and his views influence those decisions; or
  • his recommendations are always or almost always followed by shareholders who hold the majority of the voting rights in the company, when deciding how to vote.
    • A number of roles and relationships, such as professional advisers, employees and directors, are unlikely to be PSCs, unless the role differs exceptionally from how it is typically understood or forms an opportunity for that person to exercise significant influence or control.
    • From June 2016 the information on the PSC register will need to be filed at Companies House together with the confirmation statement (which replaces the annual return).
    • Failure to maintain the PSC register and/or file it at Companies House will be a criminal offence, punishable by a fine in the case of the company and by a fine and/or a prison sentence in the case of directors.
    • Action: read the government non-statutory guidance here.