This article was first published in The Gazette, and the original article can be found online here.

Since 2016, most companies have been required to keep a register of people with significant control over the company.

The purpose of this requirement is to make the ownership and control of companies more transparent and to prevent money laundering and tax evasion. It applies to all UK companies, apart from those listed on the main market of the London Stock Exchange, and to certain other entities.

To comply with the PSC regime, a company must:

  • take reasonable steps to find out if there is anyone who has significant control over the company and, if so, to identify them;
  • keep a register of people with significant control, or PSC register; and
  • file any changes to the PSC register at Companies House and confirm in its annual confirmation statement that its PSC filings are up to date.

Significant control

A person has significant control over a company if they fulfil one or more of the following conditions:

  • holding more than 25% of the shares in the company;
  • holding more than 25% of the voting rights in the company;
  • holding the right to appoint or remove a majority of the board of directors;
  • otherwise exercising significant influence or control over the company; or
  • exercising significant influence or control over a trust or firm where the trustees or members meet any of the other conditions.

The following points are worth noting:

  • The shares or rights in question may be held directly or indirectly (for example, through an overseas company).
  • If a person fulfils one or more of the first three conditions, it is not necessary to consider whether they also fulfil the fourth or fifth conditions.
  • A person who is not a shareholder or director may otherwise exercise significant influence or control over a company if, for example, they regularly or consistently direct or influence a significant section of the board.
  • If two or more persons hold shares or rights jointly, each of them is treated as holding those shares or rights.
  • A share held by a nominee for a person is treated as held by that other person.

Registrable persons and relevant legal entities

If one or more of the conditions is met by an individual, that individual is a registrable person in relation to the company.

If one or more of the conditions is met by another UK company, then that other company is a registrable relevant legal entity (or RLE) in relation to the company. It is not necessary to consider who controls the other company, which will file its own PSC information.

An overseas company, however, is not registrable (apart from companies listed on certain overseas exchanges). If one or more of the conditions is met by an overseas company, it is necessary to find out whether there is an individual who holds a majority stake in the overseas company (whether directly or indirectly). If there is, that individual will be a registrable person in relation to the UK company.

Keeping the PSC register

A company should enter an RLE in its PSC register as soon as it has the required details. It may not, however, register an individual until the details have been confirmed by the individual concerned. If a registrable person has not provided such confirmation, the company should send them a notice; if they do not respond, their shares may be made subject to restrictions.

A company has a continuing duty to keep its PSC register up to date. If there is a change to its PSCs, the company must request confirmation from the individuals concerned within 14 days, update its PSC register within 14 days of receiving such confirmation, and file any changes at Companies House within 14 days of updating the register.

Further guidance

The government’s guidance on the PSC regime may be found here. It is important to comply: if a company does not take reasonable steps to identify its PSCs, the directors may be prosecuted and could face imprisonment for up to two years.