Persons of Significant Control

Posted 08/10/2019

When referring to individuals involved in a limited company they are sometimes named as “persons with significant control” but determining who exactly is identified as having significant control. Significant control is determined by the shares owned by the shareholders; if a shareholder owns more than 25% of the shares or voting rights of a company they have significant control.

A person with significant control has the right to appoint or remove a majority of the board of directors and the right to exercise their control or influence over the company, and will have their names published in the confirmation statements uploaded to Companies House to reflect their control. The confirmation statement is a required annual statement to be submitted regarding shareholders and their holdings. Failure to register and display a person with significant control is a criminal offense. If a person gains significant control of a company between confirmation statements, they should update the register as soon as possible. Lack of communication regarding the register is not acceptable if the person is aware they have significant control of the company.

Some companies may have no person who meets the requirement and therefore does not have any persons with significant control. Alternatively, some companies may have more than one person with significant control. A director can be one of the shareholders if they own over 25% of the shares; a director who does not own at least 25% of shares has no significant control and therefore does not need to be on the register with Companies House. This is important to note as the role director can sound like it would be given to a person with control over the company. A director oversees and manages projects and activities of the company and to ensure regulations are followed as a representative of the shareholders. The director can be voted out of their position by the persons with significant control and may be elected along with other directors, each being given a section of the business as their responsibility.

A CEO (Chief Executive Officer) is responsible for reporting to the board of directors who represent the managers and shareholders that hold interest in the company which can be made up of the shareholders themselves. Similarly to the directors, the CEO will have been elected by the persons with significant control. A chairman is often involved in the board meetings to support the CEO and to ensure their points are discussed.

For most micro-entities they may have only the director listed as a shareholder, or as having a majority of the shares while a family member holds the rest, so the directors do not need to worry about being voted out of the company or someone with different interests taking control. Larger, well known companies with shares made available to the public are more likely the have a more detailed tier of control. Having shares available to the public does leave the company open to a takeover; a person could buy 25% of the shares at first to secure a position as a person of significant control before continually buying out shares to hold a major portion of control.

Tags: Limited Company, Shareholders, Directors, Definitions, Ownership