Persons with significant control: What is it? Who are they? What do we need to do?

Most of us can probably think of people in our churches that have a significant influence on how they operate: pastors, elders, trustees and even some prominent congregational members. However, are you aware that for charities that are companies (that does not include Charitable Incorporated Organisations (CIOs)), there is a Companies Act legal concept of persons with significant control (PSC) and a legal requirement to maintain a register of all PSCs?

Although this legislation is not directed primarily at charities and although it may not provide any useful information for the church, failure to comply is a criminal offence. But remember, because this is a Companies Act requirement, there is no impact on churches that are constituted as trusts or CIOs.

This issue is currently becoming more prominent in some charities’ agendas, as the banking sector is asking more questions about their clients. One of those questions is around ‘persons with significant control’ (which in normal businesses are those who really own or control the entity). It is therefore useful to understand what is required.   

Another development is that Companies House will now verify the identify of directors of companies, but also of Persons with Significant Control. Making sure the right people are verified, and people who might not be PSCs are not listed incorrectly and unnecessarily subjected to ID verification, is important. This change is a result of the Economic Crime and Corporate Transparency Act, which came into effect during 2024.

So, what makes a person with significant control?

A person with significant control is someone who meets at least one of five conditions. Three of those conditions are quantifiable with the other two requiring a degree of judgement:

Measurable conditions:

• Owns more than 25% of the shares of the company
• Holds more than 25% of the voting rights of the company members
• Has the right to appoint or remove a majority of the board of directors

Conditions requiring some judgement:

• Has the right to exercise or actually exercises significant influence or control
• Has the right to exercise or actually exercises significant influence or control over a trust or firm which itself would be a PSC if it were an individual

Whilst the measurable conditions are straightforward, the judgemental conditions are perhaps less so and can apply to any person in the church, not just the recognised leaders. For a person to be considered to exercise significant influence or control they would need to be in a position where their recommendations are always or almost always followed by those people who form a majority of the trustees/directors.

We do not think that this covers the majority of church situations, even where a pastor proves to be quite influential and gets their own way more often than not. The very act of debate and reaching a consensus means that most pastors are unlikely to meet this condition. However, in churches where the pastor is a dominant figure, both expecting and in practice seeing the church fall in line with his/her recommendations, then they are much more likely to meet this condition and so be considered a PSC.

Pastors as PSCs are those which dictate the direction of the church rather than those that win the day through debate, argument and persuasion.

What do we have to do?

The short answer is that if you are a company then you need to do something, even if you reach a conclusion that you have no PSCs in your church. To comply with the law, you must:

• maintain a register (stating you have no PSCs if that is the case)
• keep the register up-to-date
• include it with your annual confirmation statement to Companies House

There is no prescribed format for the register, but there is a list of information needed which you can find in our briefing paper, together with some examples and more in-depth consideration of the five conditions.

Conclusion

If you are a company (regardless of whether you assess that you have PSCs or not) and are not currently keeping a PSC register, then you need to start now. Although we are not expecting to see prosecutions any time soon, we believe that church companies should be leaders in compliance and best practice.