What Is a Person of Significant Control (PSC) and Why Does It Matter?

If you own or manage a UK company, you’ve likely come across the term Person of Significant Control (PSC). But what exactly does it mean, and why is it important? Understanding who qualifies as a Person of Significant Control and how to stay compliant with the relevant rules is essential for avoiding penalties and maintaining transparency.

In this blog, we explain the meaning of a Person of Significant Control, what your responsibilities are as a business, and some of the common pitfalls to avoid.

What Is a Person of Significant Control (PSC)?

A Person of Significant Control is someone who holds real influence over a company. This influence can be through share ownership, voting rights, or another form of control. A PSC must meet at least one of the following criteria:

• Owns more than 25% of the company’s shares.

• Controls more than 25% of the company’s voting rights.

• Has the right to appoint or remove the majority of the board of directors.

• Exercises significant influence or control over the company.

• Controls a trust or firm that meets any of the above conditions.

Your Responsibilities as a Company

Companies registered in the UK, including LLPs and certain other entities, are legally required to follow the PSC rules. This includes:

1. Identifying Your PSCs

You must determine who exercises significant control over your business. This includes reviewing shareholdings, voting arrangements, and any hidden influence.

2. Maintaining a PSC Register

Your company must keep a PSC register. This should include each PSC’s name, date of birth, nationality, service address, and the nature of their control.

3. Reporting to Companies House

Information from your PSC register must be reported to Companies House and updated when changes occur.

4. Updating Details Promptly
If there is a change to PSC status, you must update your PSC register within 14 days and notify Companies House within another 14 days.

5. Annual Confirmation
Even if no changes occur, you must confirm the information is correct at least once every 12 months.

Common Pitfalls to Avoid

Although the Person of Significant Control regime has been in place for some time, many businesses still struggle with compliance. Common mistakes include:

• Failing to Identify PSCs Correctly
  Some businesses don’t investigate deeply enough to identify who truly has control.

• Providing Incomplete or Inaccurate Information
  Simple mistakes, such as incorrect birth dates or spelling errors, can lead to rejected filings.

• Not Reporting Changes in Time
  Deadlines for updating PSC records are often missed.

• Neglecting the PSC Register
  Your register must be reviewed and updated regularly, not just created once and forgotten.

• Misunderstanding ‘Significant Influence or Control’
  This is often a grey area, especially in more complex ownership structures such as trusts or joint ventures.

What Are the Consequences of Non-Compliance?

Failing to comply with PSC regulations can lead to:

• Fines
  Both companies and their directors may face financial penalties.

• Criminal Charges
  Deliberately withholding PSC information is a criminal offence and could lead to prosecution.

• Reputational Damage
  Non-compliance may raise concerns with investors, regulators, and business partners.

What If No One Holds More Than 25%?

It’s not uncommon to find companies where no individual or entity owns more than 25% of shares or voting rights. Here’s what to consider:

1. Review Other Criteria
Someone may still qualify as a PSC through significant influence or control.

2. Look at Agreements and Voting Rights
Voting agreements and joint decision-making structures can reveal a PSC.

3. Consider Indirect Control
PSCs may control a company through trusts or corporate structures.

4. Declare No PSC
If no one meets the criteria after a thorough check, this must be clearly stated in the register and confirmed to Companies House.

5. Keep Reviewing
Even if no PSC exists now, this could change in the future. Regular reviews are essential.

What If a PSC Passes Away?

If a PSC dies, they must remain on the register until their interest is formally transferred. Executors do not automatically become PSCs unless they gain actual control. Once a new individual takes on significant control – such as an heir – they become the new PSC and must be registered.

How We Can Help

Managing your PSC obligations is more than a tick-box exercise, it’s about staying compliant and protecting your business. At Lewis Brownlee, we have a dedicated Company Secretarial team who specialise in PSC compliance.

If you’re unsure about identifying a Person of Significant Control, updating your register, or submitting filings to Companies House, we’re here to help. Get in touch today and we’ll make sure your company remains compliant and transparent.