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Transparency of beneficial ownership of UK companies

Transparency of beneficial ownership of UK companies

The UK Government has published a discussion paper entitled “Transparency & Trust: Enhancing the transparency of UK company ownership and increasing trust in UK business.”

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At the heart of this paper is the desire to enhance the powers of tax and law enforcement authorities to identify beneficial ownership in order to combat those who hide behind legal entities to evade tax or commit wider criminality (e.g. money laundering).

The UK Government is proposing to introduce a new central register of beneficial ownership at Companies House requiring companies to declare who owns and controls them. All UK Companies will be in scope (and potentially Limited Liability Partnerships and other entities), but the UK Government is considering an exemption for companies listed on the Main Market of the London Stock Exchange. The proposed definition of “beneficial owner“ is any individual with an interest of more than 25% of the shares or voting rights of the company; or who otherwise exercises control over the way the company is run.

The paper makes it clear that where a number of individuals collectively own more than 25% and agree to vote as a “block” they would be treated as one and their interest in the company should be disclosed. The control point would also bring in “shadow directors”. The Government will not require companies to provide details of who is the beneficial owner of every share.

Other areas of consultation where comments are requested include:

  • whether to make the beneficial ownership register public (e.g. Companies House). At a minimum the paper sets out that the information should be accessible to specified law enforcement and tax authorities;
  • whether to require the trustee(s) of express trusts to be disclosed as a beneficial owner of a company; and whether it would be appropriate for the beneficiary of the trust to be disclosed as beneficial owner(s) in certain circumstances;
  • whether to prohibit the use of new bearer shares to prevent the potential for misuse;
  •  whether to provide a set period of time for holders of existing bearer shares to convert them into ordinary registered shares;
  • whether to reform the use of nominee directors and in particular to increase transparency around their use. One option being considered is for the nominee to have an obligation to disclose the identity of the person on whose behalf they have been appointed; and
  •  whether to prohibit corporate directors entirely.

The consultation is open until 16th September.

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