Ownership and control of UK companies is under review following the Government's commitment to enhance transparency and increase trust in UK business.
In its discussion paper issued earlier this summer, the Government set out a range of proposals to:
- implement a central registry of beneficial ownership of UK companies
- introduce measures to tackle the misuse of corporate and nominee directors
Central registry of company owners
Legal ownership of UK companies is already publicly available information. However, in order to understand who really owns and controls a company, it is necessary to identify its beneficial owners.
For the purposes of the proposals, a beneficial owner is an individual with more than 25% of shares or voting rights in the company, or those who otherwise exercise control over how the company is run, irrespective of the number of shares held.
It is proposed that:
- the existing Companies Act 2006 provisions giving public companies power to ask detailed questions in relation to their beneficial ownership will be extended to all UK companies
- Companies House will maintain a central registry of the beneficial ownership information
The Government will be considering responses to the discussion paper on whether access to the central registry should be publicly available, although it acknowledges that there may be legitimate concerns over this. It has identified that, as a minimum, the information should be available to specified law enforcement and tax authorities.
The proposals envisage application of the central registry requirements to all UK companies, although the Government further acknowledges that there may be scope for excluding certain companies such as those listed on the Main Market of the London Stock Exchange, which are already subject to stringent ownership disclosure requirements.
The Government will also be considering whether to extend the proposals to other legal entities including LLPs.
Prohibition of corporate and nominee directors
Corporate and nominee directors can be used to conceal corporate control, through complex corporate ownership structures which hide the beneficial owner's true identity. A number of options have been identified to prevent misuse and increase transparency:
- requiring nominee directors to disclose to Companies House the fact that they are nominees and the identity of the person on whose behalf they have been appointed
- alternatively, making it an offence for directors to divest their duties by entering into legal arrangements which permanently hand over all responsibility for the management of the company to another individual
These proposals would make the use of nominee and corporate directors a less attractive option for concealing corporate control and help prevent the misuse of companies to facilitate criminal activity.
A more extreme option which the Government is considering is the prohibition of corporate directors entirely, although it recognises that there are legitimate reasons for their use.
What does this mean for you?
An ongoing requirement to enquire into beneficial ownership will undoubtedly result in an increased burden on businesses. The Government has, however, stated that it remains committed to reducing regulation and administrative burdens and proposes to develop these transparency reforms further, alongside deregulatory measures, this autumn.
Stop press: On 31 October, the Government announced that the proposed central register of company beneficial ownership will be made publicly accessible. It intends to publish further details on this, and on its plans for other proposals in the discussion paper, in a formal response in early 2014.