As we have referred to in previous posts, Persons with Significant Control (PSCs) of companies, LLPs etc are now required to verify their identity at Companies House, making it even more important that such entities know who their PSCs are.
The definition of a PSC is someone who satisfies one or more of the specified conditions of holing more than 25% of the shares or voting rights in the company, has the right to appoint or remove the majority of the board of directors, or exercises, or has the right to exercise, ‘significant influence or control’ over the company. This latter condition has long caused confusion. On 4/3/26 the government published new statutory guidance on its interpretation. Whilst not an exhaustive statement of what constitutes ‘significant influence or control’ it provides principles and examples to assist interpretation.
The guidance is worth a read in full but here are the highlights:
- The terms ‘significant influence’ and ‘control’ are alternatives. ‘Significant influence’ includes being able to ensure that a company generally adopts the activities the person desires. ‘Control’ includes being able to direct the activities of a company.
- A person with a right to exercise significant influence or control may be a PSC even if they do not actually exercise that right.
- Examples of what might constitute a right to exercise significant influence or control include having absolute decision rights in relation to adopting or amending the company’s business plan, appointing the CEO, or establishing bonus schemes, having absolute veto rights in relation to additional borrowing or the appointment of the majority of directors. (Such rights could be set out in the company’s constitution, a shareholder’s agreement, or be attached to the shares held.)
- Examples of what might constitute actually exercising significant influence or control include a non-board member who regularly or consistently directs or influences a significant section of the board, or is regularly consulted on board decisions (such as a company founder who no longer has a significant shareholding but makes recommendations to other shareholders).
- There is a list of roles which would not, on their own, amount to that person exercising significant influence or control, such as lawyers and accountants providing advice in their professional capacity.
- There is also a specific section dealing with trusts.