A Person of Significant Control (PSC) is an individual who benefits from the economic activity of a company and enjoys a certain degree of power over it.
At first glance, it may be difficult to identify the PSC in a company. Indeed, certain companies use illusory techniques (shell companies, shell foundations etc.) to hide the identity of the real PSC. The obligation to declare PSC of each company and to keep a national PSC registry in France is therefore in response to several international corruption scandals observed over the last few years : Panama Papers, the numerous Petrobas scandals, and also FIFA.
As such, the PSC declaration is a national obligation put in place by the government to combat the rise in money laundering and the financing of terrorism. This declaration is a new mandatory formality for all companies incorporated with the Registre du Commerce et des Sociétés (RCS) (the equivalent of Companies House) in France. This formality therefore concerns SAS(U), SARL, EURL, SA and the SCI.
From August 2, 2017, no matter the incorporation date (before or after the introduction of the law), all companies must submit a declaration. This obligation implies 2 things, according to the company’s situation:
- every company incorporated with the RCS, before August 2, 2017 must make the PSC declaration before April 1, 2018; and
- every company incorporated after August 1, 2017 must make the PSC declaration no later than 15 days following their receipt of the submission of their incorporation application.
In making this declaration mandatory, France is now amongst the small group of states which imposes a high level of transparence when it comes to PSC. Other states with a similar judicial structure are Italy, Argentina and the UK.
Who is a PSC?
The PSC is a natural person who:
- directly or indirectly holds more than 25% of the capital or voting rights of the company making the declaration; and/or
- exercises, by any other means, a controlling interest over the managerial or administrative parts of the company, or the board of shareholders of the company making the declaration.
If no one satisfies the criteria mentioned above, the legal representatives of the company will be the PSC.
Nevertheless, if the legal representative of the company making the declaration is another company, it will be the legal representative (physical person) of this holding company who will be declared PSC, as only real persons- and not corporations- may be PSC.
Here are some examples of classic situations where persons holding a certain amount of capital in a company can be declared PSC:
- The direct PSC
In this example, Mr. X, Mr. Y and Mr. Z hold respectively 50%, 30% and 20% of the company’s capital. As such, Mr. X and Mr. Y will be the PSC, as they hold each more than 25% of the capital each.
- The indirect PSC
In this example, Mr. X is the 60% owner of the company, which in turns is the 85% owner of the company making the declaration. Mr. X therefore indirectly holds (85% x 60%)= 51% of the applicant company. There will therefore be no other PSC, as the other shareholders cannot hold more than 15% of the applicant company’s share capital.
- The PSC of a company where there is direct and indirect possession of the capital
In this example, Mr. X holds 30% of the applicant company’s share capital: he will therefore be PSC because he directly holds more than 25%.
Mr. Y holds 90% of the holding company which possesses 50% of Company A, which in turn possesses 60% of the applicant company. Mr. Y therefore indirectly holds 90% x 50% x 60%= 27% of the applicant company, making him the PSC.
Mr. Z holds 50% of Company A, which in turns is the 60% owner of the applicant company. Mr. Z therefore indirectly holds 60%x50%=30% of the applicant company. He indirectly holds 10% of the capital of the applicant company. In total, he holds 30%+10%=40% of the company’s capital and is therefore PSC.
To know more on the identification of PSC, here is the informative guide provided by the the commercial courts in Paris. The different possible situations for holding capital or voting rights are detailed in this documents to help you identify the PSC.
What are the possible sanctions in the event the declaration is not made?
The Monetary and Financial Code provides serious penalties in the event the PSC declaration is not made, or improperly made:
- Individuals can spend up to 6 months in prison and pay up to 7,500€ in fines;
- Companies spend up to 37,500€ in fines and incur further penalties, including judicial surveillance or its forced winding up.