Is this the end of the secret company owner?
On 21 April 2014 the Government published its response to its consultation on 'Company Ownership - Transparency and Trust: Enhancing the Transparency of UK Company Ownership and Increasing Trust in UK Business'. The Government's response outlined how it plans to proceed with the following policies:
- improving transparency of company ownership; (e.g. banning corporate and nominee directors);
- creating a central registry of beneficial company ownership, to be maintained by Companies House;
- increasing the likelihood of creditors being compensated where they have suffered loss from director misconduct;
- improving the trust in the UK regime for disqualifying company directors; and
- banning new bearer shares.
What's the reason behind it?
The main aim of the above proposals is to increase corporate transparency and accountability and prevent money laundering and tax evasion. It is intended that these proposals will help increase trust in UK business, which will in turn help to boost the economy.
Central Registry of beneficial ownership
The most interesting proposal of all is that UK bodies corporate (generally) will have to disclose to Companies House details of their "qualifying beneficial owners". Companies House will maintain a central register of such information, which will be available for public inspection.
So who is a "qualifying beneficial owner”? It is an individual "who ultimately owns or controls more than 25% of a company's shares or voting rights, or who otherwise exercises control over the company or its management". These changes will therefore affect anyone who directly or indirectly owns, is entitled to or controls more than 25% of shares in a UK company. The Government proposes to work on this definition to ensure maximum clarity in its application.
It's proposed that the public register should contain the following information about a qualifying beneficial owner:
- full name;
- month and year of birth:
- service address;
- country/state of usual residential address; and
- date on which the person became a qualifying beneficial owner and details of their shareholding.
New companies will be required to provide such information to Companies House on incorporation and existing companies will be required to confirm the information on an annual basis.
In order to comply with the disclosure requirement, companies will be provided with certain powers in order to extract such information from beneficial shareholders and beneficial shareholders will be obliged to disclose such information. Breach of the rules by the company or the relevant beneficial owner is likely to be a criminal offence.
The proposals seem to be a positive step for the company law regime but some believe that they will impose a further burden on UK businesses, which will slow down new company incorporations and deter investors from forming or investing in UK incorporated entities as privacy and confidential information will be lost regarding a company's ownership, not to mention the likelihood of additional costs and time that a company will incur in complying with such regulations.
What's to come?
The Government plans to implement the central registry of beneficial ownership as soon as possible. As for the other proposals, the Government will legislate on them as soon as parliamentary time allows it to. Watch this space for further details.
If you have any questions or require specific advice on any matter discussed in this publication, please contact Kay-Leigh Keen (T: 01332 225 279 or E: firstname.lastname@example.org).
Kay-Leigh Keen (Solicitor), Company & Commercial Department, Smith Partnership