What do the People with Significant Control (PSC) Requirements Mean for Charities?

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After 30 June 2016 the modified Companies Act 2006 requires all Companies to file a statement listing any people with significant control of the company and to maintain a People with Significant Control (“PSC”) Register.  The regulations require companies to identify who controls or has significant influence over the running of a company.

All Companies, including those limited by guarantee and Community Interest Companies, are required to comply with the new legislation. Charitable Incorporated Organisations are not captured by these requirements.

So when does a person have significant control?

The legislation sets out five specified conditions by which a person may have significant control over a company.

The person is likely to be a PSC if any of the following conditions are met:
  • they directly or indirectly hold 25% of the equity issued;
  • they directly or indirectly hold over 25% of the voting rights;
  • that person holds the right to appoint or remove a majority of directors/trustees;
  • they have the right to exercise significant influence or control over the company;
  • they have the right to exercise, or actually exercise, significant influence or control over the activities of a trust or a firm, which in turn satisfies any of the above conditions.

The assumption among many is that a charity will not have a PSC.  While it is true that charities rarely have equity holders the second and third conditions may quite often mean that a charity actually does have individuals who are PSCs. Consider for example a three director/trustee charitable company where each trustee is a member with equal voting rights – all would be considered PSCs. Or, where the memorandum and articles of the Company gives the chair the right to remove of appoint directors/trustees – that individual would qualify as a PSC.

All charitable companies should consider the make-up of their organisations as to whether tests four or five apply. A PSC can only be a natural person, however where a legal entity satisfies any of the above conditions this should be noted as a Relevant Legal Entity (“RLE”).  In a charity context, a RLE is most likely to be the parent charitable company of a trading subsidiary, that subsidiary would therefore list that charitable company in its PSC register.

What do you need to do to comply?

You are required to take reasonable steps to identify people that have significant control or influence over the company. You should then:
  • Contact the identified PSC to obtain the relevant information for the register.
  • Include the information on your PSC register.
  • Keep the register up to date and regularly review it for changes.
  • The information on the PSC register will be publicly available and from 30 June 2016 the confirmation statement (formerly the Annual Return) filled at Companies House will include details of PSCs.

If, after taking all reasonable steps to identify the existence of a PSC,  the company is comfortable there are no individuals or legal entities which qualify this fact must be noted on the PSC register.  The Guidance states that the register must say:

“The company knows or has reasonable cause to believe that there is no registerable person or registerable relevant legal entity in relation to the company”.

The PSC register should never be left blank, Companies House does have powers to issue penalties for non-compliance.

For more information, please contact Laura Masheder or fill out the contact form below: