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Expert advice: People with significant control

Does your co-op need to comply with new rules on people with significant control?

The PSC (people with significant control) regime is being introduced in order to make it easier to find out who is controlling a company - and so cut corporate crime - and is part of a global initiative to tackle misuse of company structures.

If your co-operative is registered as a limited company, new rules around ‘people with significant control' will come into effect on 6 April 2016. We provide details here of the new rules, how co-operatives will be affected and what your co-operative needs to do to comply with them.

What are the changes?

As part of the Small Business, Enterprise and Employment Act 2015, all companies will be required to keep a new register called a 'register of people with significant control' - a ‘PSC register’ - if one or more individuals and certain legal bodies have ‘significant control’ of a company.

What is significant control?

Significant control means:

  • Owning or controlling more than 25% of the voting rights of the company;
  • Having control over the appointment or removal of the majority of the company’s board of directors; or
  • Otherwise having significant influence over the company.

Draft guidance with more details has been published and is currently awaiting approval by Parliament.

Like a company’s register of members, anyone with a proper purpose will be able to inspect the register and companies will be required to file details included in this register with Companies House on an annual basis from June 2016. So it is important for those companies affected to start preparing a PSC register now.

How will this affect co-operatives established as limited companies?

The majority of co-operative companies that are structured on a one-member, one vote basis will be largely unaffected by the change. However, there are instances where co-operatives, depending on how they are structured, may be required to keep a PSC register. Some are listed below.

Majority powers to appoint/remove directors

  • If the co-operative is structured in a way that gives another person or stakeholder the right to appoint or remove the majority of its Board, that person would qualify as a PSC.

Where the co-operative’s members are also its only directors

  • Where a co-operative has only three directors who are also its members, then each of these members will qualify as a PSC because they will each have more than 25 per cent of the voting rights in the co‑operative.

Where the co-operative has a subsidiary company.

  • If the subsidiary company is structured in a way that permits the co-operative to appoint or remove the majority of the Board then the subsidiary company must keep a PSC register.
  • If the subsidiary company is wholly owned by the co-operative, then the co-operative will be a PSC and the subsidiary company must keep a PSC register.

If your co-operative is registered as a society and has a company subsidiary, the registered society will not be a PSC as it is not a company formed under the Companies Act and the subsidiary will need to ‘look through’ the society to identify whether it has a PSC.  For example, it may be that a representative of the co-operative society exerts significant influence and control over the subsidiary and as such s/he is likely to be a PSC and his/her interest must be noted in the subsidiary company's PSC register.  The regulations as to what is meant by "significant influence and control" are currently in draft form.

What should co-operatives be doing?

All co-operatives registered as companies should investigate whether they have PSCs and/or whether they are part of a group structure in which they would be classed as a PSC.

If a co-operative decides that it has no PSCs, it can include a simple statement to this effect in the PSC Register.

If there are PSCs, the PSC register should include the following details for each PSC:

  • The name
  • Service address (if applicable)
  • Residential address
  • Nationality
  • Date of birth of the PSC
  • A statement about the nature of their control.

Who is responsible?

The responsibility of the maintaining the PSC register will, in most cases be the responsibility of the co-operative's secretary. For details on the responsibilities of the secretary, download our Essential Company Secretary in-depth guide.

Further information

Further information on the PSC requirements and the draft guidance for companies and LLPs can be found here.

Members of Co-operatives UK with the Contact package or Partner package can contact us directly to get advice on the PSC requirements. Email the advice team or call on 0161 214 1750.

Written by Linda Barlow
Updated: 29/11/2018