Directors, Shareholders, and PSCs: All you need to know

Ryan Patrick

• 5 min read
Directors, Shareholders, and PSCs: All you need to know

Directors, shareholders, and PSCs (people with significant control) play big roles in UK limited companies. These officials have different roles and carry a certain percentage of responsibility. A company may appoint different individuals for each role. However, these individuals often hold more than one role in a company. For example, a shareholder can be a director or a person of significant control.

This blog provides an insight into who they are and each role's responsibilities. Keep reading to gain a comprehensive overview of these limited companies' officials.

What's the difference between a Director, a Shareholder, and a PSC?

Every limited company must have a director, a shareholder, or a guarantor when the company is limited by guarantee during incorporation.

Many companies also have PSCs. These individuals have a substantial degree of influence in a limited company. The people with significant control are also the company's guarantors or shareholders.

Directors

A director is an employee in a limited company responsible for its management. They ensure the business meets its legal requirements per the Companies Act 2006, state regulations, and articles of association.

Directors are typically appointed by a company's shareholders, who hold authority over the company. Although shareholders entrust the appointment of company directors to the board of directors, they ultimately retain control. Directors are obligated by fiduciary duty to act in the company's best interest and that of its shareholders.

When registering a company or appointing a director, you must know the following:

  • You need a minimum of one director during company formation
  • Directors and shareholders are the same people in a company
  • You may appoint many directors to suit business needs
  • A director can be a human or another company. However, it's a must for a company to have one human director
  • There are no legal restrictions for a non-UK resident becoming a director in a UK company
  • You must be 16 to be a director, although some companies' articles of association stipulate a higher age requirement

You cannot be a director if:

  • You have an undischarged bankrupt
  • You've been banned from being a company director

The roles of a director

Becoming a director comes with lots of responsibilities, including:

  • Managing business day-to-day activities
  • Overseeing finances
  • Making decisions on members' and company's behalf
  • Pay company taxes such as VAT, PAYE, and Corporation tax
  • Ensure the business meets regulatory and statutory reporting requirements, for example, filing confirmation statements, annual accounts, and tax returns.
  • Maintaining accounting and company records
  • Decision making

These duties are stipulated in the Companies Act 2006 and the company's articles. Some companies also have directors' roles specified in their shareholders' agreements.

Shareholders

Shareholders are collective owners of a limited company. A shareholder can be an individual, another corporate entity, or an employee. The first shareholders during company formation are also called subscribers.

The company ownership of a shareholder is determined by the number of shares they possess in a company. For instance, if a business issues 1000 shares and Shareholder K holds 100 shares, K possesses 10% company ownership.

How much you own or control a company is determined by the percentage of the shares you hold and the rights attached to them.

Shareholder rights vary depending on the type of shares issued during and after company incorporation. Some shares provide dividends only, with no voting rights on company matters. Others provide extra voting rights and voting rights. Some shares offer preferential dividends or the right of the company to buy back the shares.

When issuing share, you must consider the following:

  • A company limited by share must have one shareholder, at least
  • Each shareholder is required to hold a minimum of one share in the company
  • A shareholder can also be a director
  • Shareholders qualify as Persons with Significant Control (PSCs) due to the dividend and voting rights associated with their shares.
  • Isn't a legal requirement to be a UK citizen or resident to be a company shareholder

A company can have as many shareholders as it wants unless its company articles restrict it.

There are no age restrictions for shareholders in UK-limited companies. This means even minors can become shareholders, have voting rights, and receive dividends. However, some companies restrict children from becoming shareholders in their articles.

What are shareholders' roles?

Here are the roles and duties of a company shareholder:

  • Invest your money in a company in exchange for shares
  • Receive company profits as dividends
  • Appoint the company's first director during the incorporation
  • Exercise control through voting on company vital matters
  • When the company incurs debts, you'll benefit from limited liability. This means your personal liability is determined by the nominal amount you agree to pay for your shares, commonly set at £1 per share.

Who are Guarantors, and are they Similar to Shareholders?

Guarantors are members of a company limited by guarantee, unlike shareholders, who are members of a company limited by shares. Limited by guarantee organisations don't have shareholders because they don't allot shares to distribute to members.

These companies are formed for non-profitable purposes only. On the other hand, limited by shares are incorporated for profit-making purposes.

For guarantors, limited liability for company debts is defined by a personal "guarantee" rather than shares. While most guarantees are valued at £1, they can be set at any chosen amount.

Persons with Significant Control (PSCs)

Companies House mandates every company to identify people of significant control and submit their information to the company register. This rule came to life on 30th June 2016 to enhance limited companies' transparency.

The PSCs have the power to exercise their influence over the company.

Who is a PSC?

  1. Someone holding over 25% of the company's allotted shares
  2. Someone with more than 25% of business voting rights
  3. Has the authority to appoint and dismiss the majority of the business's board of directors
  4. Has the authority to exert significant control over a limited company
  5. Has authority to exercise substantial control over the company's activities of a trust or a partnership that's not a legal entity but can meet the above conditions if it were a person.

In many limited companies with one or two owners, each member is a PSC. But companies with many shareholders members with over 25% Shareholdings or specific rights become PSCs. Remember, minority shareholders with less than 25% of company shares aren't PSCs.

A director can't be a PSC by fulfilling their normal directorial duties. They become PSC if they meet one of the conditions mentioned above.

Can the same individual be a Director, Shareholder, and PSC?

Unless the company's articles restrict it, the same individuals can be director's shareholders and PSCs in the same company.

You can establish a company independently, making you the sole director, shareholder, and person with significant control. In such a case, you would possess, oversee, and operate the entire company independently.

Final Thought

Directors, shareholders, and PSCs play essential roles in UK limited companies, each carrying distinct responsibilities and influence. Directors oversee management and legal compliance; shareholders own a portion of the company based on shares, and PSCs control company affairs.

The details of a limited company's directors, shareholders, and PSCs are available in the company register. Although individuals can hold multiple roles in a company, a directory cannot take the role of a company secretary.