People with Significant Control: Four Years On - A look back at the regime

Since April 2016, all companies have been required by law to maintain a register of People with Significant Control (PSC). In this blog, we will consider the aims of the regulatory regime and whether these have been achieved four years on.

Who are People with Significant Control?

A person with significant control (PSC) is someone who owns or controls a company. They may or may not be a company director. Occasionally they are known as ‘beneficial owners’.

A PSC is an individual who meets one or more of the following conditions:

They hold over 25% of shares in the company;
They hold over 25% of voting rights in the company; or
They have the right to appoint or remove the majority of the board of directors.

In order to identify PSCs, it may be necessary to check the company’s register of shareholders for details of voting rights, as well as its constitution and articles of association.

Other PSCs
More limited cases of where someone may be considered to be a PSC include:

If they have ‘significant influence or control’ over the company (even though they do not meet one of the first three conditions stated above).
If they have significant influence or control over a trust or firm which, in turn, either meets one of the first three conditions or holds significant influence of control over the company.

What is required under the regulations?

Under the Register of People with Significant Control Regulations 2016 (as amended by the Information about People with Significant Control (Amendment) Regulations 2017) and Part 21A of the Companies Act 2006 (along with Schedules 1A and 1B), companies are required to identify any PSCs, maintain a PSC register and relay the information in this register to Companies House.

The PSC register at Companies House is publicly available and companies will need to make their own PSC register available for inspection on request at their registered office (or provide copies upon request).

The following information about each PSC identified must be recorded:

name
date of birth
nationality
country of residence
service address
usual residential address (not displayed to the public)*
the date they became a PSC of the company
the date they were entered into the PSC register
which conditions of control are met

Levels of the shares and voting rights of any PSCs must also be included, within the following categories:

over 25% up to (and including) 50%
more than 50% and less than 75%
75% or more

The company directors should try and identify anyone who might be a PSC and contact them to ascertain the information mentioned above. Refusal to provide the relevant details is considered a criminal offence, and restrictions can be placed on the shares or voting rights of anyone who repeatedly refuses to provide PSC information (see GOV.UK for further guidance).

* When making the PSC register available for inspection or providing copies of it upon request, the residential address of a PSC should not be included. Furthermore, any individuals who may be at risk of violence or intimidation as a result of being on the PSC register can apply to Companies House to have their information protected (ie not viewable by the general public).

Changing or amending PSC information
If any of the PSC details originally gathered change (eg a PSC moves their address), if PSCs need to be added or removed, or if there is a mistake, the PSC register should be updated and Companies House should be informed of the changes. Companies are required to provide any new information on their register to Companies House within 14 days of making a change to their own register.

Failure to comply with the PSC regime
Failure to comply with the PSC regime is a criminal offence, ie if:

Company directors have failed to take reasonable steps to find out if there is anyone who is a PSC, include them on their register and relay this information to Companies House.
Company directors do not provide notice to Companies House within 14 days of making a change to their PSC register.

Companies House will normally contact a company which has failed in their PSC responsibilities and provide an opportunity for them to fix things before progressing to taking enforcement action. Sanctions for failure to comply with the PSC regime ultimately include fines and even possible imprisonment.

Compliance with the PSC regime: a post implementation review

In 2019, the Department for Business, Energy, and Industrial Strategy (BEIS) carried out a post-implementation review of the PSC register regulations to find out whether businesses were complying. Commenting on the publication of this review, Kelly Tolhurst, Parliamentary Under Secretary of State for Small Business, Consumers and Corporate Responsibility (at the time) welcomed it:

“The People with Significant Control (PSC) register was established in 2016 to enhance the transparency of ultimate (beneficial) ownership of UK companies. The goals of the register are to promote good corporate behaviour and to deter illicit activity. UK companies and partnerships in scope of the regulations are required to keep a register of their beneficial owners and to report this information to Companies House.

The review report concludes that the PSC register is meeting its objectives and that the costs to business have been proportionate and in line with the original estimates. The register is widely used, has a positive economic effect and contributes to the fight against criminal use of companies.”

The review found that, overall, businesses were complying with the PSC register regulations. The majority of businesses had submitted PSC information to Companies House around the time the regulations were implemented. Around 66% of businesses were already keeping records of their ‘beneficial owners’ before the introduction of the PSC register.

Over 90% of businesses surveyed had PSCs – with 43% having just one PSC and only 13% having three or more. Around 10% of businesses had changes to their PSCs, of which 94% had already updated Companies House at the time of the survey.

Financial cost of compliance
The mean cost of compliance with the PSC register was calculated as £287 per organisation, with the main source of financial cost being the initial submission of PSC information (the mean overall cost of this process was £259). So the overall financial cost of compliance was deemed to be relatively small, although there was some variation by business size and the complexity of ownership structure.

Aside from the financial impact, most businesses surveyed did not think that the introduction of the PSC regulations had an impact on their day to day operations. Businesses were asked to what extent the process of collecting information about their PSCs and submitting it to the PSC register had affected the way their business operates, with 95% saying they felt the process had not had any impact at all.

Use of the PSC register by businesses
Interestingly, 22% of businesses surveyed had made use of the PSC register when researching other companies, and most of these considered access to the register useful. Of the businesses which had used the PSC register to look up information about the PSCs of other businesses, the majority (64%) were researching their clients and customers. 64% of these found the information contained in the PSC register useful and 29% found it very useful.

The effect of the PSC register on the work of other stakeholders
Civil Society Organisations, most Law Enforcement Organisations and some Financial Institutions felt that the introduction of the PSC regime had a positive effect on their work. The main benefit, according to those organisations surveyed, is that the PSC register makes the process of obtaining information about beneficial ownership quicker and easier – and also cheaper in some cases.

But some Law Enforcement Organisations and Financial Institutions did not feel that the introduction of the PSC register had any positive effect on their work. The main reason for this was down to concerns regarding the quality of the information held on the PSC register and, as such, its reliability as an accurate source of information about beneficial ownership. Many of the stakeholder groups suggested that, in order to improve the quality of the information held on the PSC register, Companies House should implement validation checks (checking information at the point it is submitted) and verification processes (verifying the accuracy of the information submitted).

Use of the Protection Regime
As mentioned above, any individuals who may be at risk of violence or intimidation as a result of being on the PSC register can apply to Companies House to have their information protected. This is known as the ‘Protection Regime’. On average, applications to suppress PSC information under the Protection Regime take between 6 – 9 months to process. Between April 2016 and January 2019 Companies House received 903 applications pertaining to the Protection Regime. 52% of the requests to suppress information were approved during this period, 18% were denied, 24% were still awaiting a decision and 5% were rejected due to a problem with the application (such as errors or lack of payment).