What is a person with significant control (PSC)?

A person with significant control (PSC) refers to an individual who holds substantial influence or control over a company, either directly or indirectly. The concept of significant control is often used in the context of corporate governance and transparency, particularly in relation to companies and their ownership structures.

Starting from April 6, 2016, the ‘people with significant control’ register was put into operation, requiring all businesses to maintain a record of individuals who have the ability to shape or direct a company’s operations. These individuals are more commonly recognised as the beneficial owners of the company.

Since companies are already required to maintain certain details in their official records, the PSC register includes information such as names, dates of birth, and nationalities. It is the responsibility of the company to confirm the accuracy of this information with the relevant PSC.

The definition of a PSC may vary depending on the country or jurisdiction, but it typically includes individuals who meet one or more of the following criteria:

1. Ownership: Individuals who directly or indirectly own a significant portion of the company’s shares or voting rights. The specific threshold for “significant” ownership may be defined by applicable law or regulation.
2. Control: Individuals who have the power to exercise significant influence or control over the company’s decision-making, such as through the ability to appoint or remove directors.
3. Significant influence: Individuals who can materially influence the company through other means, even if they do not hold substantial ownership or direct control.

The concept of PSC has become more prominent as part of efforts to improve corporate transparency and combat money laundering and illicit finance. Many countries now require companies to maintain PSC registers and disclose relevant information to authorities, making it easier for investors, customers, regulators, and other stakeholders to understand who truly controls a business.

What does person with significant control mean?

The term “Person with Significant Control” (PSC) refers to individuals or entities that hold significant influence or control over a company. This concept, introduced under UK law, requires companies to disclose certain details about their PSCs to improve transparency and reduce misuse of corporate structures. A PSC is usually someone who directly or indirectly holds more than 25% of the shares or voting rights in a company, or who can control company decisions, such as through appointing directors or directing the company’s strategy.

The point of the regime is straightforward: it identifies the people who actually control or benefit from a company’s activities. That makes it harder to hide money laundering, tax evasion, and other financial crime behind anonymous ownership structures.

Who qualifies as a person with significant control?

Understanding who qualifies as a PSC is not always straightforward, because control is not limited to what appears on paper. Common examples include:

1. Ownership of shares or voting rights: If an individual or entity owns more than 25% of the shares or voting rights in a company, they are generally considered a PSC. This can include indirect ownership through a third party or trust.
2. Right to appoint or remove directors: Even without majority ownership, a person may qualify as a PSC if they can appoint or remove most of the board or otherwise direct the company’s decisions.
3. Significant influence: If a person or entity can significantly influence the company’s activities without direct ownership, they may still qualify as a PSC. This can arise through contractual control, special voting arrangements, or similar mechanisms.

Each company must identify its PSCs and report them through the appropriate filings, typically as part of its annual confirmation statement or equivalent reporting process.

Why is it important to identify the person with significant control?

Identifying and recording the person with significant control matters for several reasons:

1. Transparency: One of the main purposes of the PSC requirement is to improve transparency. By identifying the real individuals behind a company, it becomes harder for bad actors to hide behind layered structures.
2. Combatting financial crime: PSC transparency supports efforts to prevent money laundering, tax evasion, terrorist financing, and similar offences. It gives authorities a clearer route to the people actually exercising control.
3. Regulatory compliance: Companies that fail to comply with PSC reporting obligations can face penalties, fines, or other enforcement action. Staying compliant avoids unnecessary legal and financial risk.
4. Corporate governance: Identifying PSCs helps clarify who has real authority within a business, which can strengthen governance and reduce internal ambiguity.

Identifying a PSC

Most PSCs are individuals who hold:

• more than 25% of shares in the company
• more than 25% of voting rights in the company
• the right to appoint or remove the majority of the board of directors

Identifying a person with significant control generally involves determining who has substantial influence over a company or legal entity. The exact requirements depend on the type of entity and the rules in the relevant jurisdiction, but the process usually includes the following steps:

1. Legal and regulatory framework: Understand the rules in your jurisdiction that define PSCs and set the reporting requirements.
2. Ownership structure: Review the company’s ownership structure, including shareholder records, share classes, and any legal arrangements affecting control.
3. Shareholders and beneficial owners: Identify individuals or entities who directly or indirectly hold significant shares or voting rights, including beneficial owners who enjoy the economic benefits without being the registered holder.
4. Voting rights and decision-making: Determine who has meaningful influence over company decisions, even without large shareholdings. This could include veto rights or contractual control.
5. Access to financial information: Consider whether certain individuals have the practical ability to direct financial activity or control sensitive business decisions.
6. Directors and officers: Assess the roles of directors, officers, and senior executives. In some cases, these individuals may qualify as PSCs if they exercise real control.
7. Contracts and agreements: Review contracts or other arrangements that grant a person significant influence or control over the company.
8. Disclosure and reporting: Ensure the company reports PSC information as required and keeps its records accurate and current.

Identifying persons with significant control improves transparency and supports compliance. It helps prevent misuse of corporate entities for illegal purposes such as tax evasion, corruption, or other financial crime.

ID-Pal’s solution helps organisations identify ultimate beneficial owners and company directors globally. The platform is designed to support compliance teams in identifying PSCs and UBOs, then verifying their identities through a progressive web application that supports identity verification, document validation, liveness checks, and address verification.

To explore how ID-Pal can simplify the process, you can schedule a free demo.