A Guide to People with Significant Control (PSCs) and ID Verification

Since the introduction of the People with Significant Control (PSC) register in 2016, transparency has become a cornerstone of the UK’s corporate landscape. No longer can the true ownership of a company be shielded behind layers of complex structures without disclosure. However, with the recent implementation of the Economic Crime and Corporate Transparency Act 2023, the rules surrounding PSCs have evolved significantly, particularly regarding identity verification. For business owners and directors, understanding who qualifies as a PSC and how to verify their identity is no longer just a matter of good practice—it is a mandatory legal requirement that carries significant penalties for non-compliance.

Understanding the PSC Framework

The PSC regime was designed to increase trust in the UK business environment by making it clear who ultimately owns and controls UK companies. This transparency helps prevent money laundering, tax evasion, and the financing of terrorism. When you form a new limited company, identifying your PSCs is one of the first and most critical steps in the incorporation process.

A PSC is typically an individual, but in some cases, a legal entity (such as another limited company) may be registrable if it is the first "relevant legal entity" (RLE) in the ownership chain. To be considered a PSC, an individual must meet one or more of the following conditions:

The Five Conditions of Control

• Condition 1: Holds, directly or indirectly, more than 25% of the shares in the company.
• Condition 2: Holds, directly or indirectly, more than 25% of the voting rights in the company.
• Condition 3: Holds, directly or indirectly, the right to appoint or remove the majority of the board of directors.
• Condition 4: Has the right to exercise, or actually exercises, significant influence or control over the company.
• Condition 5: 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 entity, but would itself satisfy any of the first four conditions if it were an individual.

For most small to medium-sized enterprises (SMEs), Condition 1 and Condition 2 are the most common. For example, if Sarah and David set up a company where Sarah owns 75% of the shares and David owns 25%, Sarah is a PSC. David, however, does not meet the "more than 25%" threshold and would not be a PSC based solely on shareholding, unless he meets one of the other conditions.

New Identity Verification Requirements

The Economic Crime and Corporate Transparency Act has introduced a fundamental shift in how Companies House operates. One of the most significant changes is the identity verification. This measure ensures that the person listed on the register is exactly who they claim to be, adding a layer of security against identity theft and corporate fraud.

Under the new rules, all PSCs (and Relevant Legal Entities) must have their identity verified. This process can be completed in two ways: directly through Companies House using a digital identity check, or via an Authorised Corporate Service Provider (ACSP). As an established provider of business compliance services, Formation Direct acts as an intermediary, ensuring that our clients' verification data is handled securely and submitted correctly to the Registrar.

For new companies, PSCs must be verified at the point of incorporation. For existing companies, there is a transitional period during which all PSCs must complete the verification process. Failure to verify doesn't just result in a "flag" on the public record; it can lead to civil penalties and may prevent the company from filing other essential documents, effectively freezing its ability to operate legally.

What Information Must the Register Contain?

Once a PSC is identified and their identity verified, specific information must be recorded. Accuracy is paramount here, as the public register at Companies House must mirror your internal records. The required details include:

• Full name and date of birth.
• Nationality and country of residence.
• Service address (this will be public).
• Usual residential address (this remains private and is not disclosed on the public register).
• The date they became a PSC of the company.
• Which of the five conditions they meet, including the level of their shareholding or voting rights (e.g., "greater than 25% but not more than 50%").

It is important to note that if your company has no PSCs—perhaps because no single person owns more than 25% and no one exercises significant influence—you cannot simply leave the register blank. You must enter a specific statement on the register confirming that the company has taken reasonable steps to identify its PSCs and has concluded that there are none.

Managing Changes and Ongoing Compliance

Compliance is not a one-time event. The PSC register is a "living" document. If a shareholder sells their shares, or if a new director is appointed with specific controlling rights, the register must be updated immediately. The law dictates strict timelines: you have 14 days to update your internal register after a change occurs, and a further 14 days to notify Companies House.

Practical examples of changes that trigger an update include:

• A PSC changing their name following marriage or deed poll.
• A PSC changing their residential or service address.
• A transfer of shares that takes a shareholder above or below the 25%, 50%, or 75% thresholds.
• A change in the rights attached to a specific class of shares.

Neglecting these updates is one of the most common reasons companies receive compliance notices. By using a professional company secretarial service, you can ensure that these filings are handled automatically, protecting you from the risk of prosecution.

Frequently Asked Questions

What happens if a PSC refuses to provide their information?

If an individual fails to provide the necessary information after receiving a formal notice from the company, the company must "place restrictions" on their shares. This effectively freezes their ability to sell shares or exercise voting rights until they comply. The company must also notify Companies House of this restriction.

Can a company be a PSC?

A company cannot be a "Person" with Significant Control, but it can be a "Relevant Legal Entity" (RLE). An RLE is a legal entity that would be a PSC if it were an individual, and it is subject to its own disclosure requirements (such as being registered with Companies House). Only the first RLE in a chain of ownership needs to be recorded.

Is the PSC’s home address visible to the public?

No. While a residential address must be provided to Companies House, it is kept on a private register. Only the "service address" is visible to the public. Many business owners choose to use their registered office as a service address to maintain their personal privacy.

Do I need to verify my identity if I am already a director?

Yes. The identity verification requirements apply to all directors and all PSCs. If you hold both roles, you only need to verify your identity once, but that verification must be linked to both your director and PSC records at Companies House.

What are the penalties for PSC non-compliance?

Failure to comply with PSC requirements is a criminal offence. Directors and the PSC themselves can face unlimited fines and, in extreme cases of deliberate concealment, a prison sentence of up to two years. Furthermore, the company’s reputation may be damaged, affecting its ability to secure credit or attract investors.

Staying Compliant with Formation Direct

Navigating the complexities of the People with Significant Control regime and the new identity verification mandates can be daunting, especially for new entrepreneurs. However, maintaining a transparent and accurate record is vital for the legitimacy and longevity of your business. At Formation Direct, we specialise in taking the administrative burden off your shoulders. From the moment of incorporation to ongoing secretarial support, we ensure your PSC records are accurate, your identity is verified, and your company remains fully compliant with the latest UK legislation.

Don't leave your compliance to chance. If you are unsure about your PSC status or need assistance with the new identity verification process, contact our expert team today or explore our comprehensive company formation packages to get your business started on the right foot.