In recent years, governments and regulatory bodies across the globe have become increasingly focused on promoting corporate transparency and accountability.
In this effort, identifying the individuals who control companies—often referred to as "People with Significant Control" (PSCs)—has become a crucial aspect of governance and regulation. PSCs are individuals or entities who have significant influence or control over a company, and their identification ensures transparency in the ownership and control of companies.
Understanding People with Significant Control (PSCs) in Nigeria
This article provides a detailed overview of PSCs, their significance, the regulations governing them, and the implications for businesses in Nigeria.
What Are People with Significant Control (PSCs)?
People with Significant Control (PSCs) are individuals or legal entities who hold considerable influence or control over a company. They are typically those who directly or indirectly own a significant portion of a company's shares or voting rights, or who otherwise can make major decisions regarding the company's operations.
Governments require companies to identify PSCs to ensure transparency in corporate ownership structures, reduce the risk of illegal activities such as money laundering or tax evasion, and ensure that control over companies is properly disclosed.
A PSC typically meets one or more of the following criteria:
- Ownership of Shares:
- Holds more than 25% of the shares in the company.
- Holds more than 25% of the voting rights in the company.
- Control Over the Board:
- Has the right to appoint or remove the majority of the board of directors.
- Influence Over Company Decisions:
- Exerts significant influence or control over the company, even if they do not meet the shareholding or voting rights criteria.
- Trusts and Partnerships:
- If a trust or partnership meets the above criteria, the individuals who control that trust or partnership may also be considered PSCs.
Importance of Identifying People with Significant Control
Identifying PSCs is essential for several reasons:
- Transparency and Accountability:
- The PSC register enhances transparency regarding who owns and controls companies, making it easier for stakeholders, including investors and regulatory bodies, to understand the ownership structure.
- Combating Financial Crimes:
- By identifying PSCs, authorities can better combat money laundering, tax evasion, and other financial crimes. The PSC register serves as a tool for law enforcement agencies to investigate suspicious activities.
- Promoting Good Corporate Governance:
- Knowledge of who holds significant control helps promote good governance practices and ensures that companies operate in the best interests of their shareholders and stakeholders.
Regulatory Framework for People with Significant Control in Nigeria
The regulation of PSCs in Nigeria is primarily governed by the Companies and Allied Matters Act (CAMA) 2020. Key provisions include:
- Establishment of the PSC Register:
- Companies are required to maintain a register of PSCs, detailing the individuals who meet the criteria for significant control.
- Obligations of Companies:
- Companies must take reasonable steps to identify their PSCs and keep their PSC register updated. This includes confirming the identity of PSCs and recording their details, such as name, date of birth, nationality, and the nature of control.
- Reporting Requirements:
- Companies must submit their PSC information to the Corporate Affairs Commission (CAC) within specified timeframes, ensuring that the information is accurate and current.
- Sanctions for Non-Compliance:
- Failure to comply with PSC regulations can result in penalties, including daily monetary fines, restrictions on shares, and potential imprisonment for company officers who provide false information or fail to submit required details.
How to Identify People with Significant Control
Identifying PSCs involves several steps:
- Review Shareholding Structures:
- Examine the company’s register of members to identify individuals holding more than 25% of shares or voting rights.
- Analyze Governance Documents:
- Review the company’s articles of association and other governance documents to determine who has the right to appoint or remove directors.
- Consider Indirect Control:
- Assess whether any individuals exert control indirectly through other entities or trusts.
- Engage with Stakeholders:
- Communicate with shareholders and stakeholders to gather information about potential PSCs and confirm their details.
Maintaining the PSC Register
The PSC register must include the following information:
- Name of the PSC
- Date of Birth
- Nationality and Country of Residence
- Service Address (Correspondence Address)
- Home Address (not disclosed publicly)
- The date they became a PSC
- Nature of Control (e.g., shares held, voting rights)
Companies must update the PSC register whenever there are changes to the information and must notify the CAC within 14 days of any changes.
Conclusion
Understanding and identifying People with Significant Control (PSCs) is vital for ensuring transparency, accountability, and good corporate governance in Nigeria. The regulatory framework established by CAMA 2020 and the PSC Regulations 2022 provides a structured approach for companies to comply with these requirements. By maintaining an accurate PSC register, companies not only fulfill their legal obligations but also contribute to the integrity of the business environment in Nigeria. regarding ownership and control, the PSC framework helps combat financial crimes and fosters trust among stakeholders, ultimately leading to a more robust and accountable corporate sector
