How do Charities and their Subsidiaries report People with Significant Control (PSC)?

How do Charities and their Subsidiaries report People with Significant Control (PSC)?

It is a requirement for People with Significant Control, for most unlisted UK companies (including charitable companies and their subsidiaries), to be reported at Companies House with the company’s Annual Confirmation Statement.  As the name suggests, PSC is there to record any individuals, that have significant control or influence over a charitable company or its subsidiary, on public register held by Companies House.

This article will talk you through how to identify a Person with Significant Control (PSC) and what the implications are for charities and their trading subsidiaries.

What is a PSC?

A PSC is a person (natural or legal*) that has at least 1 of the following 5 conditions:

• They hold more than 25% of the shares in the company.
• They hold more than 25% of the voting rights in the company
• They hold the right to 'appoint' or 'remove' the majority of the board of directors.
• They have the right to exercise of actually exercise 'significant influence or control' over the company.
• They have the right to exercise or actually exercise 'significant influence or control' over a trust or firm, then that itself meets any of conditions 1 to 4.

If the person meets any of the first 3 tests, then it is not necessary to go on and consider tests 4 and 5. However, do check the 'excepted roles' below before reporting.

*As noted above, the persons that should be entered on a company’s PSC register can include both ‘natural persons’ and ‘legal entities’.  For legal entities, they are only entered onto PSC register if they are both relevant and registrable.

Relevant – means the legal entity meets 1 or more of the 5 conditions above and either keeps its own PSC register (or it has voting shares admitted to trading on a regulated market.)

Registrable – means the legal entity is the first relevant legal entity in the company’s ownership chain.

What does this mean - first relevant legal entity in the company’s ownership chain?

A company only reports the first registrable persons in an ownership chain.

Example:  If A (a natural person) holds 100% of the shares in company B, and B holds 100% of the shares in company C, then company C would report company B in its PSC register and company B would report natural person A in its PSC register.

Excepted Roles

Before reporting the PSC, you will need to consider if the natural or legal person you had in mind meets one of the following ‘excepted roles’.  These roles are not considered, on their own, to result in a person having significant influence or control, and include:

• Employees acting in the course of their employment.
• Representation rights held by a group of employees.
• Professional advisors and third party commercial or financial agreements.
• A person who makes one off recommendations.

Charities and their Trading Subsidiaries – what does this mean in context?

The short answer is, it depends on what type of charity you are.  Included below are the most common structures.

Charitable Company Limited by Guarantee

• As a limited company the charity will need to keep its own PSC register.
• If the charity has 4 or more vote holders (and their votes are equal) then it is likely that there are no PSCs.
• If a charity has 3 or fewer vote holders (and their votes are equal) they are each likely to be a PSC
• However, the charity should review its Articles of Association and Register of Members to establish who holds the voting rights in the charity, in case of members being able to act together or where there are nominees or joint holdings – in which case further analysis maybe required.
• If a Charitable Company holds all the shares in a limited company (eg its trading subsidiary), the parent charity is the PSC for the trading company as it both relevant and registrable.

CIOs, SCIOs and Royal Charter companies

• These entities are NOT required to keep their own PSC registers.
• If such an entity holds all shares in a limited company (eg its trading subsidiary), the parent entity is NOT itself a relevant legal entity so should NOT be included in the trading subsidiary company’s PSC register.
• But if any person holds more than 25% of the voting rights in the parent entity, or has the right to exercise or actually exercise significant influence or control over the parent entity, then that person may have to be included in the trading company’s PSC register.

Charitable Trust

• An unincorporated charitable trust is NOT required to keep its own PSC register.
• If a charitable trust holds all the shares in a limited company (including shares held by trustees as nominees), the trust is NOT itself a relevant legal entity so should NOT be included in the company’s PSC register.
• However, if a person has the right to exercise or actually exercises significant influence or control over the trust, that person will meet test 5 (above) and may therefore have to be included in the company’s PSC register.

What if you don’t have a PSC?

If there are no PSCs, then the following entry must be made on the PSC register:

“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.”

Would you like to know more?

If you have any queries regarding what we cover in our guide, please get in touch with your usual contact or email charities@azets.co.uk.