Difference Between Person of Significant Control PSC vs. Ultimate Beneficial Owner UBO

Do you know that not identifying the true owners of a company can lead to big fines and legal problems? With ever-changing financial rules and increasing economic challenges, knowing who you are doing business with has never been more important. Every business, big or small, has a hierarchy—from owners to employees. To be transparent, official records must show who is in control. This includes identifying Ultimate Beneficial Owners (UBOs) and Person with Significant Control (PSCs)—the people who control the business. Proper documentation of these key individuals is key to regulatory compliance, fraud prevention, and accountability in business.

Understanding the difference between them is important for compliance and risk management. In this blog, you’ll find a full breakdown of UBOs, PSCs, and the key differences.

What is a Person with Significant Control (PSC)?

A Person with Significant Control (PSC) is someone who controls or owns your company. You should check your company’s register of members or articles of association for information on shareholders and voting rights. Most PSCs will be individuals who meet one or more of the following conditions:

• Holds more than 25 percent of your company’s shares.
• Holds more than 25 percent of the voting rights.
• Has the right to appoint or remove the majority of directors.
• Can exercise significant control or influence.

Let’s make the concept more clear with some examples:

Example 1: Hary owns 100% of the shares of company A Limited, and the shares have associated voting rights attached to them. This means Hary qualifies as a PSC, and the details should be recorded on the PSC register with the appropriate percentage of shares and voting rights.

Harry’s right to appoint or remove the majority of directors should be assessed and documented accordingly.

Example 2: Let’s say there is another company, B Limited. Charlie and Harry hold 50% of the shares in Company B Limited. The shares have associated voting rights attached to them. This means they both qualify as PSCs. The company should check if they have the right to appoint or remove the majority of directors and include this if possible.

What Does “Control” Exactly Mean for PSCs?

In rare cases, a person can qualify as a PSC without directly meeting these conditions if they exert significant influence over the company’s operations. Someone may have influence or control of your company through other means. This would be directly or on behalf of someone else. For example, someone may influence or control the actions of directors or shareholders.

Example 3: Lisa, who doesn’t hold any shares, has an absolute right to veto over the company’s business plans. Lisa is the PSC in this scenario, and the details must go on the PSC register.

What is an Ultimate Beneficial Owner (UBO)?

An Ultimate Beneficial Owner (UBO) is an individual who benefits most from the company’s success, whether directly or indirectly. For example, if a company successfully closes a deal, the UBO of a company would get maximum benefit.

The Financial Action Task Force (FATF) defines the ultimate beneficial owner as:

• A natural person/s who ultimately owns more than 25 percent of shares or voting rights in a company.
• A person/s on whose behalf a transaction is being made.
• Person/s who exercise ultimate effective control over a legal person or arrangement.

Key Differences Between Ultimate Beneficial Owner vs . Person with Significant Control

Suggested Read: Business Structures Revealed | Understand Sole Proprietorship vs LLC

Challenges in Identifying UBOs and PSCs

Information on both ultimate beneficial owners and persons with significant control is an obligatory requirement for legal entities. Here are some common challenges that you may face while identifying:

• Conceptual Overlap: While the UBOs and PSCs are related concepts, they are distinct concepts. Most companies are unaware of what makes them different from each other, resulting in non-compliance, incomplete reporting, and inefficient verification procedures.
• Complex Ownership Frameworks: Layered entities spread across countries make it difficult to trace the actual owners. PSC and UBO identification help find hidden structures and reduce money laundering and regulatory risk.
• Jurisdiction Limitations: Reporting standards of UBO and PSC data may vary across jurisdictions, making data accessibility a challenge.
• Nominee Shareholders: A company may have individuals listed as shareholders acting on behalf of the real owner. This obscure arrangement can be challenging for regulatory bodies to identify true owners. Conducting a UBO check helps businesses verify the true owners behind corporate structures, ensuring transparency and compliance with regulatory requirements.
• Non-Reliable Data: Registers comprising important company data can be used when they are available, and they provide the necessary information. However, that is not always the case. The data is often used by criminals to create fake companies, impacting their reliability.

Why are Both Ultimate Ultimate Beneficial Owners and Persons with Significant Control Important?

Knowing the difference between ultimate beneficial owners (UBOs) and persons of significant control (PSCs) is not just important for compliance. To stay on top of the rules, manage risk, and have financial transparency, you need to know this difference. Different countries have their own rules for reporting UBOs and PSCs with varying levels of transparency and enforcement.

Companies based in the UK must identify the people who can exercise significant control, registering them on the Company House. Accurate PSC data is essential for maintaining transparency in corporate governance, ensuring that entities disclose individuals with significant control over business decisions.

Countries like the USA, Canada, UAE, and the EU have strict UBO reporting requirements, mandating businesses to maintain UBO registers.

The Role of The KYB in Managing Risks Related to Complex Corporate Structures

Finding UBOs and PSCs can be a nightmare for businesses when dealing with complex ownership structures, multiple beneficiary layers, and inconsistent global reporting standards. These challenges not only strain internal resources but also expose your business to compliance penalties, financial fraud, and regulatory scrutiny.

Overlooking these challenges can create significant gaps in your due diligence process, exposing your organization to risks from hidden ownership structures or inadequately verified licenses. With so much at stake, accurate and complete information is essential.

That’s where The KYB comes in. Our KYB analysts dig through many sources to provide UBO evaluations, unravel complex beneficiary layers, and verify licenses and permits with accuracy. UBO verification is essential for ensuring that businesses operate with complete transparency, preventing financial fraud, and meeting global compliance standards. We help you meet compliance requirements while reducing risk so you can focus on what you do best.Don’t let hidden ownership structures put your business at risk.

Let The KYB help you navigate corporate transparency with precision. Contact us today to simplify your compliance process!