Since the introduction of the Economic Crime and Corporate Transparency Act (ECCTA), all people of significant control (PSCs), alongside directors, need to have their identity verified through Companies House. Here we outline the considerations in determining who is a PSC within an organisation.

Defining a PSC

A PSC is, according to government guidance, a person who owns or controls a company, also sometimes referred to as ‘beneficial owners’. A company may have one or more PSCs, and a person may be a PSC for more than one company.

To be a PSC, a person must meet one or more conditions. Typically, this means one or more of the following:

• The person has 25% of shares or voting rights in the company.
• The person can appoint or remove most directors.
• The person can influence or control the company or trust.

While a PSC may often have 25% of shares or voting rights, they don’t necessarily need to have that 25% share to be a PSC. Nor will everyone with more than 25% of voting rights have the influence on the company, where their rights can’t be exercised independently. The decisive factor is the governance position of the company, not the percentage alone.

These three conditions might be met directly or indirectly. For example, if a person holds their rights through another company, they would meet those conditions indirectly.

Other circumstances and considerations

There are circumstances in which a PSC might influence or control a company through ‘other means’. If an individual does not meet any of the above conditions but can exercise ‘significant influence or control’ over a company – for example, through contractual arrangements – they could classify as a PSC.

Likewise, where a trustee or a member of a firm meets one of the four conditions or would satisfy one of those conditions if they were an individual, they may be a PSC.

The statutory guidance on PSCs outlines some examples of the kind of influence a PSC would have on an entity. For example, absolute decision or veto rights over critical business decisions, such as:

• a company business plan;
• the nature of a company’s business;
• borrowing from lenders;
• appointment or removal of a CEO;
• amendments to any profit-sharing;
• bonus or incentive schemes; or
• granting options.

It’s worth noting that if a person holds absolute veto rights in some areas for the purpose of protecting minority interests, it’s unlikely to meet the criteria for ‘significant influence or control’. That might, for example, include changing a company’s constitution, diluting shares or rights, or winding up a company.

It may also be true that someone may have more than 25% of voting rights but not be a PSC. For example, in the case of some trusts, where a guarantor may own a significant voting share but cannot act without the agreement of other trustees.

It is also possible that a minority shareholder in an entity has significant governance rights and therefore can be said to have significant influence or control over the organisation.