UK Companies are required to record information about their PSCs (people with significant control) on the PSC Register at Companies House. Accountants are required to examine that PSC information for their UK client companies and report any material discrepancies to the Registrar of Companies.
Over the next two years Companies House will be requiring the IDs of all PSCs and company directors to be verified. So it is important that the information held on the PSC Register is correct and complete. But often it is not, and that may be because the disclosure rules are misunderstood. So what PSC disclosures are required?
Where are the official rules?
The legislation is in Part 21A Companies Act 2006, sections 790A to 790ZH, and Schedule 1A and The Register of People with Significant Control Regulations 2016 – but frankly these are not the easiest read!
In practice most companies will fall into one of a handful of types. There are three bands of significant control which will apply to most PSC disclosures concerning share ownership and voting rights –
- more than 25% but not more than 50%
- more than 50% but less than 75%
- 75% or more
It is the relevant band which must be disclosed in the PSC Register (not the actual percentage).
There must also be disclosure where a person has a right to appoint or remove directors. Normally a person will have a right to appoint or remove directors if they hold a majority of the voting shares (because a director may be appointed by an Ordinary Resolution of shareholders) or if they are the sole director (because a director may be appointed by a decision of the directors). However there may be special rules in the company’s Articles of Association and, if so, these can affect the PSC disclosures which are necessary for the company.
There are further disclosure obligations which apply in a small minority of cases, but to keep this blog simple we shall not deal with those unusual cases here.
Some common situations
Let’s look at some of the most common situations and the PSC Register entries required for them.
Example 1 – 100% ownership
Peter owns 100% of the shares in P Ltd and is the sole director. There are no unusual provisions in the company’s Articles of Association regarding voting rights or powers. The required disclosures in the PSC Register of P Ltd are that Peter has
- Ownership of shares – 75% or more
- Ownership of voting rights – 75% or more
- Right to appoint or remove directors
Note that all three disclosures are required, it would not be sufficient to disclose only that Peter owns 75% or more of the shares.
Example 2 – 50/50 ownership
John and Jane each own 50% of the shares in JJ Ltd and they are both directors of the company. There are no different classes of shares and no unusual provisions in the company’s Articles of Association regarding voting rights or powers. The required disclosures in the PSC Register of JJ Ltd for John and also for Jane are that each of them has
- Ownership of shares – more than 25% but not more than 50%
- Ownership of voting rights – more than 25% but not more than 50%
Note that both disclosures are required, it would not be sufficient to disclose only the ownership of the shares. Neither of them has the right to appoint or remove directors, so no disclosure is required there.
Example 3 – 60/40 ownership
Norman owns 60% of the shares in NN Ltd. The other 40% of the shares are owned by Nadine. They are both directors of the company. There are no different classes of shares and no unusual provisions in the company’s Articles of Association regarding voting rights or powers. The required disclosures in the PSC Register of NN Ltd for Norman are that he has
- Ownership of shares – more than 50% but less than 75%
- Ownership of voting rights – more than 50% but less than 75%
- Right to appoint or remove directors
The required disclosures in the PSC Register for Nadine are that she has
- Ownership of shares – more than 25% but not more than 50%
- Ownership of voting rights – more than 25% but not more than 50%
Example 4 – 75/25 ownership
Celia owns 75% of the shares in CC Ltd. The other 25% of the shares are owned by Colin. They are both directors of the company. There are no different classes of shares and no unusual provisions in the company’s Articles of Association regarding voting rights or powers. The required disclosures in the PSC Register of CC Ltd for Celia are that she has
- Ownership of shares – 75% or more
- Ownership of voting rights – 75% or more
- Right to appoint or remove directors
No disclosures are required in the PSC Register in respect of Colin who does not hold more than 25% of the shares, nor more than 25% of the voting rights, and does not have power to appoint or remove directors.
Example 5 – no PSCs
ABCDE Ltd has a share capital of £100 comprising 100 £1 Ordinary shares. There are no different classes of shares and no unusual provisions in the company’s Articles of Association regarding voting rights or powers. Angela owns 22 shares, Brian owns 21 shares, Charles owns 20 shares, Diane owns 19 shares and Elaine owns the remaining 18 shares. All of them are directors of the company. So there is no one who owns more than 25% of the shares in ABCDE Ltd, or has more than 25% of the voting rights, or who has power to appoint or remove directors. So there are no PSCs for ABCDE Ltd.
The required disclosure in the PSC Register of ABCDE Ltd is that
- 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
Example 6 – voting and non-voting shares
GG Ltd has a share capital of £100. This comprises 50 £1 ‘A’ shares which have voting rights and 100 £0.50 ‘B’ shares which have no voting rights. George owns all the ‘A’ shares. Gerald owns all the ‘B’ shares. Both of them are directors of the company. So each of them owns shares having a nominal value of £50 and the total issued share capital of the company is £100. This means each of them has 50% ownership of the company’s shares (because the ownership percentages are based the aggregate nominal values of the shares held – not the number of shares held), but George owns 100% of the voting rights.
The required disclosures in the PSC Register of GG Ltd for George are that he has
- Ownership of shares – more than 25% but not more than 50%
- Ownership of voting rights – 75% or more
- Right to appoint or remove directors
The required disclosures in the PSC Register for Gerald are that he has
- Ownership of shares – more than 25% but not more than 50%
Example 7 – Holding company and subsidiary
H Ltd holds 100% of the shares in S Ltd. Both H Ltd and S Ltd are companies registered in England and Wales. Tracy owns 51% of the shares in H Ltd. The other 49% of the shares in H Ltd are owned by Tina. Both of them are directors of H Ltd and S Ltd. There are no different classes of shares and no unusual provisions in H Ltd’s Articles of Association regarding voting rights or powers. The required disclosures in the PSC Register of H Ltd for Tracy are that she has
- Ownership of shares – more than 50% but less than 75%
- Ownership of voting rights – more than 50% but less than 75%
- Right to appoint or remove directors
The required disclosures in the PSC Register of H Ltd for Tina are that she has
- Ownership of shares – more than 25% but not more than 50%
- Ownership of voting rights – more than 25% but not more than 50%
The required disclosures in the PSC Register of S Ltd in respect of H Ltd are that H Ltd has
- Ownership of shares – 75% or more
- Ownership of voting rights – 75% or more
- Right to appoint or remove directors
No other disclosures are required in the PSC Register of S Ltd because Tracy and Tina only hold shares in S Ltd indirectly via their holding of shares in H Ltd and H Ltd is a registrable relevant legal entity.
(However for the purposes of the Money Laundering Regulations 2017 Tracy and Tina will both be beneficial owners of H Ltd and S Ltd.)
Updating or correcting the PSC Register
There are a range of Companies House forms, PSC01 to PSC09, for updating or correcting the PSC Register for a company.
Once the company becomes aware that the information on the PSC Register needs updating the appropriate form should be filed at Companies House within 14 days. The forms can be filed online. There are no fees payable to Companies House for filing the PSC forms.
Confirmation Statements and the PSC Register
Companies are required to file Confirmation Statements at Companies House every year. But filing a Confirmation Statement does not update the PSC Register – if an update to the PSC Register is required that needs to be done using one of the PSC forms.
Normally the entries on the PSC Register should be consistent with the most recent information on shareholdings contained in a Confirmation Statement filed by the company (except where there has been a change since the latest Confirmation Statement which has caused the PSC Register to be updated).
Summary
The rules for correct and complete entries in the PSC Register at Companies House are often not fully understood. Getting the PSC Register information right before the new legal requirements come into force for the verification of the identities of company directors and PSCs may save time and trouble in future!
