A Person With Significant Control is an individual who has influence over the company. A Person With Significant Control may or may not own many shares in the company, they may or may not be directors. In basic terms if an individual can alter what the company does, how the company does it and when the company does something, then that individual is a Person with Significant Control.
The UK government passed the legislation creating People With Significant Control requirements in 2016. The Regulation sets out in precise detail how to determine if you are or are not a Person with Significant Control.
The reason that the government introduced the People with Significant Control requirements is to bring greater transparency to UK registered companies. The government’s main concern is make sure they know who is running UK companies. That enables much easier regulation, and ability to reach people in the event that something goes wrong with the company. In addition, the government wants to prevent limited companies and other corporate bodies from being used for bad purposes such as money laundering.
A Person With Significant Control is often referred to as a PSC. When you form a company you will need to identify a Person or Persons With Significant Control. For most small and new companies, Directors and Shareholders are automatically Persons With Significant Control because they own more that 25% of the company. For example if you are a one-person company, then you will own 100% of the company. In that case you are automatically a Person with Significant Control. The same logic applies if you are 2 people who own the company 50/50. You are both considered Persons With Significant Control.
When you are forming a company with MachFast.com the app will quickly ask you to confirm whether you, as a Director or Shareholder of the company, are a Person With Significant Control. Often, if you use other means to form a company you will have to fill out additional forms and or answer many more questions to complete the PSC information.
As you will see form below, the rules focus on the ‘real’ person or people who ‘pull the strings’ in the company. A Person With Significant Control is anybody who:
- holds, directly or indirectly, more than 25% of the shares
- holds, directly or indirectly, more than 25% of the voting rights
- holds the right, directly or indirectly, to appoint or remove a majority of directors
- otherwise has the right to exercise, or actually exercises, significant influence or control over the company
- has the right to exercise, or actually exercises, significant influence or control over the activities of a trust or firm which is not a legal person
- the trustees or members of which would satisfy any of the four conditions above
The UK Companies House put together a very helpful video that explains People With Significant Control requirements.