Persons of Significant Control

The PSC register and its intricate web of rules for who actually are the Person(s) of Significant Control for some companies can be confusing. A lot of time can be wasted information gathering between our team, our clients and their clients as we try and drill down the correct information to be registered. We have spent many hours poring over the 117-page guidance notes from Companies House to better advice our clients right from the start of a company formation process.

One particular rule that is worth addressing and alerting you too when gathering information is the correct PSC to register when an offshore company meet one of the PSC criteria;

  • It holds over 25% of the share capital
  • It has voting rights for the company
  • It has the right to appoint and remove directors (ordinarily anyone holding over 50% of the share capital)

If the offshore company is deemed a PSC by meeting at least one of the aforementioned conditions it needs to consider a different PSC reporting than for a UK company.

We would recommend that a further check should be done to see if the offshore company itself has any individuals or companies have a majority stake in the company, as they are required to be registered as the PSC NOT the offshore company itself. We have outlined below Companies House guidance on this rule.

Guidance from Companies House – Indirect Ownership

The shares and rights in a company might be held indirectly when someone has a majority stake in the legal entity that meets the PSC criteria.

For companies registered in the UK (including LLP’s and Scottish partnerships and SE’s) that person is not required to be entered on the PSC register unless the legal entity they hold their interest through is not a RLE. This is the case for the following:

A legal entity might not be an RLE because:

  1. It is a UK legal entity which is not a company, LLP, eligible Scottish partnership or SE; or
  2. It is a non-UK company

Instead, you must look at the ownership and control of that legal entity to identify any individuals or RLEs who have a majority stake in that legal entity. Someone will hold a majority stake if:

  • They hold a majority of the voting rights in the legal entity > 50%
  • They are a member of the legal entity and have the right to appoint or remove a majority of its board of directors;
  • They are a member of the legal entity and control a majority of the voting rights by agreement with other shareholders or members

See the chart to compare the PSC for each company A, B, and C when companies are UK companies compared to the final diagram when there are overseas companies in the ownership structure.

Figure: the correct PSC for Company A, B and C with UK companies compared to overseas companies

PSC for Company A, B and C

Paragraph 18 of Part 3 (of Schedule 1A of the Companies Act 2006) sets out the rules for interpreting how someone ‘indirectly’ holds shares or voting rights under PSC conditions 1 (share capital) and 2 (voting rights).

Additionally, paragraphs 7.4.5 to 7.4.9 inclusive and Figure 7 (pages 36 and 37) of Companies House guidance sets this out. To download the full 117-page guidance notes click here.

Written by Clifford Frimpong