People with significant control register - PSC Register

4 Jul 2016 Denise Copeland    Last updated: 4 Jul 2016

From 6 April 2016 companies, including not for profit companies, are legally required to keep a register of individuals or legal entities that have control over them, known as ‘people with significant control (PSC)’ and ‘relevant legal entities (RLEs)’

The PSC register must be established and maintained by companies on an ongoing basis and the information filed at Companies House on an annual basis, even if the company does not have any people with significant control.  The guidance states that:

“You must take reasonable steps to determine whether any individual or any legal entity meets the conditions for being a PSC or registrable RLE in relation to your company, and if so, who that person or registrable RLE is.”  

Most charitable and social enterprise companies will have a straightforward ownership and control structure and should be able to identify quite quickly whether or not they have a person with significant control or a registrable RLE.   The statutory guidance outlines how to identify a person with significant control: 

What is a PSC (Person with significant control)?

A PSC is an individual who meets one or more of the following five conditions in relation to your company:

  • 1st condition: Directly or indirectly holding more than 25% of the shares; (example could be a wholly owned trading subsidiary of a charity or a joint venture company owned by a few charities);
  • 2nd Condition: Directly or indirectly holding more than 25% of the voting rights; (example could be a charitable company with less than four members);
  • 3rd Condition: Directly or indirectly holding the right to appoint or remove a majority of directors; (example could be a trading subsidiary of a charity);
  • 4th Condition: Otherwise having the right to exercise, or actually exercising, significant influence or control; (example could be the founder of a charity or an observer or advisor to the board whose recommendations are almost always followed);
  • 5th Condition: Having the right to exercise, or actually exercising, significant influence or control over the activities of a trust or firm which is not a legal entity, but would itself satisfy any of the first four conditions if it were an individual. (example could be the trustees of an unincorporated charity with an incorporated trading subsidiary). 

     

    What is not a person with significant control?

    The statutory guidance outlines some examples of excepted roles for each of the five conditions which would not on their own result in that person being considered as a person with significant control (provided that there is no written document which states otherwise).  Under the 4th condition excepted roles include a director of a company including one who is also a managing director and non-executive directors who hold a casting vote. An employee acting in the course of their employment and; solicitors, accountants or consultants providing advice or direction in a professional capacity are also included as excepted roles for the purposes of the 4th and 5th conditions. 

    The guidance also states “Any person or entity in relation to any association…or network of companies which promulgates common rules, policies or standards to be adopted by the members of the network, but does not otherwise have control of the members of the network.” is an excepted role.

    Is a director (trustee) of a charitable company a PSC?

    Many charities may find that they do not satisfy the first three conditions listed above however charities which have less than four members would satisfy the 2nd condition as they would each share more than 25% of the voting rights.  Quite often in this type of charity, the board and the members are the same people, so in this instance the directors (trustees), being the members, would be people with significant control. 

    For those that don’t meet the first three conditions, they must then consider the 4th and 5th conditions by having regard to the statutory guidance.  Directors (trustees) are listed as excepted roles under the 4th condition in the statutory guidance, so many charitable companies will probably find that they don’t have any people with significant control. If this is the case, they will need to state that on their PSC register as the PSC register cannot be empty (see below).

    Is a charity’s trading subsidiary a registrable RLE?

    A Charity which own 25% or more of the shares or voting rights in a subsidiary company would be considered a registrable RLE.  Charities which have come together to set up a joint venture company will also satisfy conditions one and/or two if they own 25% or more of the shares or voting rights in the joint venture company.  The charity or charities should be entered as a registered RLE (relevant legal entity) on the PSC register.  They will need to choose the appropriate statement from the guidance depending on whether they meet conditions one, two or five. 

    Completing the PSC Register

    The guidance states that the PSC register must never be empty, even if you don’t have all the required information you should include a statement on the register to demonstrate that you’re taking reasonable steps to ascertain what, if any, people with significant control or registrable relevant legal entities you may have. The guidance states the register must say that:

    “The company has not yet completed taking reasonable steps to find out if there is anyone who is a registrable person or a registrable relevant legal entity in relation to the company.”

    If you have taken all reasonable steps and are confident that there are no individuals or legal entities which meet any of the five conditions, you must enter the following statement in your PSC register:

    “The company knows or has reasonable cause to believe that there is no registrable person or registrable relevant legal entity in relation to the company.”

    For companies which do have a PSC or registrable RLE, they need to make sure that they have the relevant information about the person with significant control and that this information is confirmed before the details are entered on the PSC register. While you need to have the correct information about a registrable RLE, this information does not have to be confirmed.  The statement to be included on the PSC register for a trading subsidiary (share company) wholly owned by a charity as a registrable RLE is:

    “The person holds, directly or indirectly, 75% or more of the shares in the company.”

    Or for a trading subsidiary (guarantee company) wholly owned by a charity:

    “The person holds, directly or indirectly, 75% or more of the voting rights in the company. “

    Once you have all the required information, you need to enter this on the PSC register as soon as possible.  If you don’t have all the information that you need, you are required to serve notice on the individual or legal entity.  Example notices and further detailed guidance about content and updating the PSC are provided in Chpts. 3 - 4 of the non-statutory guidance note.

    Confirmation statement (formerly the Annual Return)

    As of 30 June, the confirmation statement replaces the annual return which is intended to make it easier for companies to update their information on an annual basis.  The confirmation statement will include a section to include information from your PSC register. 

    Further information

    Please note that this guidance note is not intended to be legally comprehensive: it is designed to provide guidance in good faith without accepting liability.  If relevant, we therefore recommend you take appropriate professional advice before taking any action on the matters covered herein.  

    Please see the Department for Business Innovation & Skills non-statutory guidance note and statutory guidance for detailed information on satisfying the conditions and details to be included in the register. 

Every effort is made to ensure that the contents of this document are accurate, but the advice given should not be relied on as a definitive legal statement.
by Denise Copeland

Governance and Charity Advice Manager

[email protected]

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