19th September 2014

New public register of beneficial ownership


19th September 2014

New public register of beneficial ownership

The Government has confirmed that it intends to introduce a bill in this Parliament to set up a new, publically accessible central register of UK company beneficial ownership to “improve corporate transparency and accountability in the UK.”

The register will contain information on individuals who ultimately own or control more than 25{ba3215b0bf35eaeb06be458b3396ffbfc50bb9db10c9ff1594dfc3875e90ea48} of a company’s shares or voting rights, or otherwise exercise control over the company and its management. It will detail where a person’s interest is held jointly or with another individual or as a result of various shareholdings in the company, such that they can control more than 25{ba3215b0bf35eaeb06be458b3396ffbfc50bb9db10c9ff1594dfc3875e90ea48} of the company’s shares or voting rights. Where a qualifying beneficial interest in a company is held through a trust, the trustees or any other natural persons exercising effective control over the trust will be required to be disclosed as the beneficial owner of the company. In most cases, that will only require the trustees to be registered, but in some cases may be another person such as the beneficiary or settlor.

In summary, the register will contain the beneficial owners’:

  • Full name and date of birth;
  • Nationality and country or state of residence; and
  • Residential address and service address

as well as:

  • The date on which the beneficial interest in the company was acquired; and
  • Details of the beneficial interest and how it is held.

Companies will be required to maintain their own register and make any necessary changes to it. All information held by the company will be provided to Companies House, where it will be publically accessible with the exception of residential addresses and full dates of birth.

Companies will be required to provide an initial statement of beneficial ownership on incorporation and will then be required to confirm that the information held at Companies House is correct at least once a year. Similar ownership details of LLPs will also be included on the register.

Existing company law criminal offences will be extended or replicated in order to enforce such new rules on disclosing beneficial ownership.

Other Government proposals

Other related proposals include the following:

  • The creation of new bearer shares is to be prohibited. It is proposed for there to be a nine month period following this policy coming into force during which bearer shareholders can surrender their bearer share warrants and convert them to registered shares.
  • Companies to no longer be required to file annual returns. Instead companies would be required to go through a checking process at least once a year to ensure that the information held at Companies House is up to date.
  • Companies to have the option of not keeping most statutory registers. Instead companies would have to make sure that the registers at Companies House were fully updated and information currently appearing only in the company’s statutory registers (e.g. the addresses of shareholders) would be shown instead at Companies House.
  • Director’s full dates of birth will no longer be on the public record to help prevent against identity theft (save in cases where the company has opted out of keeping a register of directors).
  • Director’s will no longer have to sign the forms for their appointment. Currently directors have to either sign an AP01 form for each appointment or supply three pieces of personal information for electronic filings. Instead new directors will be written to by Companies House and asked to confirm their appointments.
  • Corporate directors will be prohibited (currently a company can have a corporate director provided that at least one of the directors is a natural person), but with specific exemptions for large groups of companies and charities. This will also apply to existing corporate directors which will need to be removed (if an exemption does not apply) and the Government is suggesting that a one year period for compliance should be sufficient.
  • The regime for disqualifying directors will be broadened, with unfitness being determined by a broader and more generic provision. Also courts will be able to take overseas misconduct into account when deciding whether to disqualify a director.

From a public policy perspective, the new register of beneficial ownership will be a step towards greater transparency as to who “really” owns a UK company. However, the proposal is not without controversy. The Law Society has warned that the “proposals may damage the attractiveness and competitiveness of the UK as a jurisdiction for the incorporation of companies. We believe that the effect of introducing the proposals will be to drive investors to form companies outside the UK and that the UK could therefore lose a considerable amount of business as a result.”

With regards timing, all that the Government is saying at the moment is that the required primary and secondary legislation needed to enact the above measures will be introduced “as soon as Parliamentary time allows.” Nothing has been drafted yet, so it is unlikely that the bill will become law by the time of the May 2015 general election. This lack of clarity as to when these measures might come into force (in particular the register of beneficial ownership and abolition of corporate directors) is frustrating for the many thousands of companies who will be affected by the increased compliance burden.