PSC Rules for Companies Limited by Guarantee (LBG Guide)

Companies limited by guarantee (LBGs) are widely used by charities, sports clubs, associations and other not‑for‑profit organisations. Although these companies do not issue shares, they must still identify and record Persons with Significant Control (PSCs). Understanding how PSC rules apply in an LBG is particularly important where decision‑making authority does not follow a traditional shareholder model.

This article explains what PSCs are, how they are identified in LBGs under the Model Articles, the need to maintain an accurate PSC register, and the circumstances in which PSC status arises. It is written in a clear, practical style similar to Inform Direct. For guidance on VS01 timing and identity‑verification procedures, please refer to the Smart Formations VS01 guide.

Readers who need guidance on when VS01 submissions are required, how they are filed electronically, and the distinction between obtaining a Personal Verification Code (PVC) and submitting a VS01, should follow our detailed Smart Formations guide to the VS01 Verification Statement.

At a Glance (Quick Summary)

For readers scanning quickly or arriving via search, this section provides a concise overview of how PSC rules apply to LBGs.

• Most LBGs using unmodified Model Articles and having four or more members will have no PSC, unless enhanced voting or appointment rights exist.
• PSCs are identified using three statutory conditions.
• Voting‑based PSCs are rare because the Model Articles follow a one‑member‑one‑vote structure.
• PSC reporting is separate from identity verification
• Charitable Incorporated Organisations (CIOs) are not subject to PSC rules unless they also operate through an LBG.

For full guidance, visit: www.smart-formations.co.uk

What Is a PSC in an LBG?

In a company limited by guarantee, identifying a PSC can be less straightforward than in a company with shares. Without ownership stakes to analyse, the assessment focuses on how decisions are made and who may direct or influence them. Without ownership stakes to assess, the focus shifts to understanding how decisions are made and who is able to direct or influence them.

A Person with Significant Control (PSC) is an individual (or, in some cases, a legal entity) who has meaningful influence or control over how the LBG is run.

Because an LBG has no shares, PSC status is assessed using three statutory conditions:

• Voting rights — only relevant where a member holds more than one vote or where membership is so small that one vote effectively gives an individual control. Under the Model Articles, each member has one vote, so this condition is rarely triggered.
• Appointment or removal rights — where an individual can appoint or remove a majority of directors.
• Significant influence or control — where a person directs strategy or operations, controls key decisions, or is routinely followed by the board.

These statutory conditions apply across all companies limited by guarantee, regardless of size or purpose.

PSCs and the Companies House Model Articles (Governance Overview)

Most guarantee companies use the Model Articles for Companies Limited by Guarantee (Schedule 2 of the Companies (Model Articles) Regulations 2008). These Articles set out the default governance arrangements, including how voting works, how directors are appointed or removed, and how decisions are taken. This framework is central to understanding whether anyone meets a PSC condition.

Key features of the Model Articles relevant to PSCs

• Every member has one vote.
• Directors are appointed and removed by ordinary resolution, unless amended.
• No weighted voting or special control rights exist unless added in bespoke Articles.

The PSC Conditions Applied to LBGs (Statutory Tests)

• Voting Rights (only where a member holds more than one vote)

  Under the statutory PSC regime, an individual is a PSC if they hold more than 25% of the voting rights. Because the Model Articles give every member one vote, this test is only met:

  • if the Articles have been amended to create weighted or multiple‑vote rights, or if a supplemental agreement exists that grants enhanced or additional voting rights,
  • where the LBG has four or fewer members, allowing a single vote to exceed 25%.

  Where the Model Articles remain unmodified and the LBG has five or more members, the voting‑rights PSC test can never be met.

• Appointment/Removal Rights

  An individual is a PSC if they can appoint or remove a majority of directors. This may arise from:

  • bespoke Articles,
  • a members’ agreement,
  • a parent‑body constitution, or
  • certain funding arrangements.

• Significant Influence or Control

  This final condition applies where a person:

  • directs strategy or operations;
  • controls finances or key decisions;
  • is routinely followed by the board, even without formal authority.

Ongoing Monitoring of Membership in LBGs

In many LBGs—particularly clubs, associations and charities—membership can change frequently as individuals join and leave. Where the organisation uses the Model Articles and each member has one vote, these changes will not usually create or remove PSCs. However, in smaller LBGs with only a few members, changes in membership numbers can affect whether any individual holds a controlling proportion of the voting rights.

Larger LBGs, or those with fluctuating membership, should therefore ensure they have processes in place to:

• monitor changes in membership size;
• review whether any amendments to the constitution could simplify PSC assessments; and
• ensure the PSC register accurately reflects the organisation’s current structure.

Where an LBG wishes to avoid continual reassessment of control, it may consider whether revised Articles or clearer governance structures would simplify ongoing PSC assessments.

Maintaining the PSC Register (Statutory Obligation)

Every LBG must maintain an internal PSC register showing:

• full name;
• date of birth;
• service and residential addresses;
• PSC conditions met and nature of control;
• date control was acquired.

The register must always be kept up to date.

Reporting PSC Information to Companies House (Filing Duties)

LBGs must file PSC details:

• on incorporation; and
• whenever PSC information changes.

Failure to do so is a criminal offence for the company and its officers and may lead to rejection of future filings.

Identity Verification for PSCs (Separate From Reporting)

Verification is separate from PSC reporting. PSCs must verify their identity, but the timing and submission of a VS01 are explained fully in the Smart Formations VS01 guide.

Examples of PSC Situations in Practice

• A founder continues to direct strategy or operations.
• A council or parent charity controls appointments or key decisions.
• A funding contract gives approval rights over budgets or management.
• A club or association has many members and therefore no PSC under Companies House rules.

How 1st Choice Formations Can Help

As an Authorised Corporate Service Provider (ACSP), we can carry out Companies House identity‑verification checks for directors and PSCs and provide a secure online portal for submitting electronic PSC‑related filings. We do not advise on whether an individual is or is not a PSC, nor do we interpret constitutions or governance arrangements. Organisations unsure about PSC status should seek independent professional advice.

We can assist with the following filing functions:

• completing identity‑verification checks for PSCs and directors (UK and non‑UK);
• linking verified identities to the company once the organisation has determined who its PSCs are;
• filing PSC updates and Confirmation Statements after verification.

For a detailed explanation of how verified PSC information is recorded at Companies House, see our Smart Formations article on the VS01 Verification Statement.

A Note About Charitable Incorporated Organisations (CIOs)

CIOs are not regulated by Companies House unless they are also registered as an LBG (which is unusual). PSC rules apply only to entities registered at Companies House, so a CIO is outside the PSC regime unless it also operates through, or is separately constituted as, an LBG.

Conclusion

LBGs must identify and record PSCs in line with Companies Act requirements. Because most LBGs operate on a one‑member‑one‑vote basis under the Model Articles, many will have no PSCs, unless an individual has enhanced rights or exerts influence in practice. PSC reporting is separate from identity verification, and organisations must ensure both obligations are met.

Legal References

• Companies Act 2006, Schedule 1A – defines the statutory conditions for identifying a Person with Significant Control (PSC), including voting rights (para. 2), appointment/removal rights (para. 3), significant influence or control (para. 5), and the meaning of “majority of directors” (para. 4).
• Companies Act 2006, ss. 790M–790ZA – sets out company obligations to maintain a PSC register, the duty to investigate PSC information, and criminal offences relating to non-compliance.
• The Companies (Model Articles) Regulations 2008 (SI 2008/3229), Schedule 2 – provides the Model Articles for Companies Limited by Guarantee, including voting rights (Art. 26), director appointment/removal procedures (Arts. 17–23), and member/board decision-making rules.
• Economic Crime and Corporate Transparency Act 2023 (ECCTA 2023), Part 2 – introduces the identity‑verification regime for directors, PSCs and relevant officers, and empowers Companies House to require Digital Identity Verification Codes (DIVCs) for filings.
• Companies House Identity Verification Rules (2025) – require each PSC to complete identity verification and obtain a Personal Verification Code (PVC) before PSC‑related filings are accepted, and require a VS01 to link the verified identity to each company or LLP.
• Charitable Incorporated Organisations (General) Regulations 2012 – govern CIOs, which do not fall within the PSC regime unless they are also constituted as, or operate through, an LBG entity.