Is your business controlled or owned by a foreign legal entity, such as a company outside the UK or any other legal entity?
This article explains how to identify the People with Significant Control (PSC) of your business if it is under the control or ownership of a foreign legal entity. A lot of foreign legal entities may not qualify as PSCs and should not be included in the PSC register unless they fulfill the conditions of being both relevant and registrable.
Contents
How to Check PSC Eligibility
To verify if your business meets the criteria of being relevant and registrable, refer to our article on UK businesses owned by a UK legal entity. If the legal entity doesn’t fulfill the necessary conditions, the business must examine the ownership and control of the foreign legal entity to identify any individuals or Relevant Legal Entity (RLE) that holds a majority stake in the legal entity.
Defining Majority stake
A Majority stake is held if the person;
- Holds a majority of the legal entity’s voting rights (more than 50%).
- Is a member of the legal entity and has the right to appoint or dismiss the majority of its board of directors.
- Is a member of the legal entity and controls the majority of voting rights via agreement with other shareholders or members.
- Has the right to exercise, or actually exercises significant influence or control over the legal entity.
If there is an individual or RLE with a majority stake in the foreign legal entity, their details must be entered into the PSC register. Their control should mirror the indirect control they have over the foreign legal entity’s shares and voting rights in the company.
Example Scenario
To illustrate, consider Company B Limited, a foreign legal entity. It owns 100% of the shares and voting rights in a UK company, Company A Limited. However, Company B Limited isn’t listed on any regulated market and doesn’t meet the registrable and relevant conditions. Hence, it must not be entered in the PSC register. Company A investigates its ownership chain and discovers that Harry holds 60% of shares and voting rights in Company B Limited. Harry meets the criteria of a PSC with a majority stake in Company B Limited, hence his details must be entered in the PSC register of Company A Limited. Furthermore, his level of control should reflect his indirect authority over 100% of the shares and voting rights in Company A Limited.
Further Investigation
The company must continue to scrutinize its ownership chain until they find an individual or RLE with a majority stake. If no person has a majority stake, the business must declare on the PSC register that it has no PSCs. If your business has a more complex ownership structure, kindly refer to our guideline on our site or seek legal advice.
How to send PSC information
The most efficient way to submit your PSC data is to file it online. It’s quick, free, and you only need to register an account.
Navigating the intricacies of identifying significant control within a UK company owned by an overseas entity demands a meticulous approach to compliance and transparency. This comprehensive guide offers a strategic roadmap for discerning individuals with substantial influence over the company’s operations and decision-making processes, despite the complexities of international ownership structures.
By adhering to the guidelines outlined in this guide, UK companies can effectively navigate the regulatory landscape, ensuring full compliance with legal obligations while fostering trust among stakeholders. Embracing transparency and accountability not only strengthens corporate governance practices but also positions the company for sustainable growth and success in an increasingly interconnected global economy.
