The significant influence or control PSC condition

An individual is a person with significant control (PSC) if they have the right to exercise, or actually exercise, significant influence or control over a company, even without holding more than 25% of the shares or votes. This is the fourth condition in Schedule 1A to the Companies Act 2006, and anyone applying it must have regard to the government’s statutory guidance, reissued in March 2026. Absolute decision or veto rights over how the business is run, or routinely steering the board or shareholders, point towards it; acting as an adviser, lender or director does not, on its own.

Where does the condition come from, and how binding is the guidance?

Paragraph 5 of Schedule 1A says the fourth condition is that the individual “has the right to exercise, or actually exercises, significant influence or control” over the company. It sits alongside the share, voting and board appointment conditions. The fifth condition, in paragraph 6, applies the same idea to whoever controls a trust or firm that itself meets a condition; it is covered in PSCs where shares are held by a trust. This page deals with the fourth.

Paragraph 24 requires the Secretary of State to issue guidance on the meaning of “significant influence or control”, and says regard must be had to that guidance when interpreting the phrase. A draft must be laid before Parliament, and it is issued only if neither House resolves against it within 40 days. The current version, “Statutory guidance on the meaning of significant influence or control over companies”, was published on GOV.UK on 4 March 2026. It is expressly not exhaustive: it gives principles and examples, and says the facts of each case should be considered carefully.

What do “significant influence” and “control” mean?

The guidance treats them as alternatives. A person who can direct the activities of a company has control. A person who can ensure that the company generally adopts the activities they want has significant influence. Neither has to be exercised with a view to economic benefit, so an individual who gains nothing financially can still be a PSC.

When does someone have the right to exercise it?

A right can come from the articles, the rights attached to shares or securities, a shareholders’ agreement, another agreement or otherwise, and it can make someone a PSC whether or not they use it. The guidance gives these indicators:

• Absolute decision rights over running the business, such as adopting or amending the business plan, changing the nature of the business, additional borrowing, appointing or removing the chief executive, setting up or changing bonus or incentive schemes, or granting share options.
• Absolute veto rights over running the business, such as over the business plan or additional borrowing.
• An absolute veto over appointing the majority of directors, meaning those holding a majority of board votes on all or substantially all decisions.

“Absolute” means the person can make or block the decision without reference to or collaboration with anyone else. By contrast, vetoes held to protect minority interests are unlikely on their own to amount to significant influence or control. The guidance lists changes to the constitution, dilution of shares or rights, borrowing outside previously agreed lending thresholds, fundamental changes to the business and winding up. Rights held only as a prospective buyer, on a temporary basis such as pending competition clearance, do not count either. Rights written into investment documents are discussed in shareholders’ agreements.

When does someone actually exercise it?

Here the guidance looks at behaviour rather than documents, and says all of a person’s relationships with the company and its managers should be considered together. A person actually exercises significant influence or control if:

• they are significantly involved in managing and directing the company: for example, someone who is not on the board but regularly or consistently directs or influences a significant section of it, or is regularly consulted on board decisions and whose views influence them. This includes a shadow director under section 251, meaning a person in accordance with whose directions or instructions the directors are accustomed to act, but is not limited to one; or
• their recommendations are always or almost always followed by the shareholders holding the majority of the votes when deciding how to vote.

The overlap with shadow directorship is explained in shadow and de facto directors.

Which roles do not count on their own?

Part 4 of the guidance lists “excepted roles” that do not, by themselves, amount to significant influence or control:

• professional advisers, including lawyers, accountants, management consultants, investment managers, tax advisers and financial advisers;
• third parties under a commercial or financial agreement, such as suppliers, customers and lenders;
• people exercising a statutory function, such as a regulator, liquidator or receiver;
• employees acting in the course of their employment and as nominee for their employer;
• directors, including a managing director, a sole director and a director with a casting vote;
• someone making recommendations to shareholders on a one off occasion on a matter put to a shareholder vote;
• rights held by employees collectively to represent their interests in an employee owned company;
• a network or standards body that sets common rules for its members but does not otherwise control them.

The exception falls away if the role differs in material respects from how it is generally understood, or is one of several opportunities the person has to exercise significant influence or control. The guidance’s own example is a director who also owns intellectual property vital to the business and uses that leverage to influence decisions; that director cannot rely on the excepted role.

How does this apply to founders, lenders and advisers?

Illustration only.

• The diluted founder. After two funding rounds Sam holds 12%. Before each general meeting she tells the main investors how she thinks they should vote, and they always follow her. That matches the guidance’s founder example, so she is likely to be a PSC under the fourth condition. If she had made one recommendation on a single sale vote, the one off exception would apply.
• The investor with vetoes. A fund holding 18% has an investment agreement giving it an absolute veto over the annual business plan and any new borrowing. Those are vetoes over running the business, which point towards significant influence. A fund whose vetoes cover only changes to the articles, new share issues and winding up holds minority protections and is unlikely to qualify on that basis.
• The bank. A lender whose facility agreement contains ordinary covenants is an excepted role. A lender that also takes rights to approve the business plan and appoint the chief executive is acting beyond the usual lending relationship and may need to be considered further.
• The accountant. Giving tax and accounting advice is excepted. An adviser whose instructions the board habitually follows, beyond advice in a professional capacity, risks being a shadow director and a PSC.

A PSC must be an individual; where the influence is exercised by a company, the rules on relevant legal entities apply instead.

How is it reported to Companies House?

A company only has to consider the fourth condition for people who do not meet any of the first three. The statutory guidance notes that, under regulation 7(1)(d) of the Register of People with Significant Control Regulations 2016, a PSC who holds more than 25% of the shares or votes or can appoint the board need not also be reported under the fourth condition. Someone who does meet it is reported like any other PSC, within 14 days of the company having confirmation of their status and particulars, with “significant influence or control” as the nature of control. They must also verify their identity with Companies House and provide their personal code. Changes are reported as described in notifying PSC changes. If, after considering this condition, nobody qualifies under any condition, see companies with no registrable PSC.

What mistakes come up?

• calling it the fifth condition, which is the separate trust and firm test
• assuming a holding of 25% or less can never create a PSC
• treating every investor veto as control without asking whether it only protects a minority
• relying on an excepted role, such as director or adviser, where the person also holds key assets or other levers
• looking only at the documents, when the second limb is about what actually happens
• keeping no note of why the company concluded someone does or does not meet the condition

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Related Accountapedia entries

• Persons with significant control (PSC)
• The EIS risk to capital condition
• The VAT control account
• The PSC register for LLPs
• HMRC taking control of goods

See also: PSC01: telling Companies House about a new PSC.

Sources

• legislation.gov.uk: Act 2006 c. 46, schedule 1A
• legislation.gov.uk: Act 2006 c. 46, schedule 1A
• GOV.UK: People with significant control 2026 company statutory guidance
• GOV.UK: Statutory guidance on the meaning of significant influence or control
• legislation.gov.uk: Act 2006 c. 46, section 251
• GOV.UK: People with significant control guidance on regime for legal entities
• legislation.gov.uk: Act 2006 c. 46, section 790LA
• GOV.UK: People with significant control pscs
• legislation.gov.uk: Act 2006 c. 46, section 790C

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.