Out-Law News | 04 Nov 2013 | 12:06 pm | 3 min. read
The decision comes following feedback as part of a consultation exercise carried out by the Department for Business, Innovation and Skills (BIS) in July. The UK committed to the creation of a central registry of companies’ beneficial owners, meaning those that hold more than 25% of its shares or voting rights, at the G8 summit in June.
“A stronger economy depends on investors, employees and the wider public having trust and confidence in companies and those that are running them,” said Business Secretary Vince Cable. “We believe a public register, listing those who really own companies, makes Britain a better place to invest and do business.”
“People have a right to know who controls UK companies and greater openness will help tackle tax evasion, money laundering and other crimes. The vast majority of companies and directors in the UK contribute productively to the economy, abide by the rules and make an enormous contribution to society. But an errant few operate in the shadows, creating ownership structures that serve to deceive,” he said.
In June, leaders of the G8 group of the world’s largest economies committed to keeping registers of who really owns and controls the companies operating in their territories, and to make this information available to national law enforcement and tax administration authorities. The agreement also encouraged countries to provide basic company and beneficial ownership information to authorities in other territories on request.
As announced before the summit, the UK plans to require companies to supply information about their beneficial owners to a central registry, to be maintained by Companies House. This registry would hold information on individuals who hold 25% or more of a company’s shares or voting rights, or who otherwise control the way a company is run. For example, a number of individuals collectively holding more than 25% of the shares, but agreeing to vote in the same way, could be treated as one ‘owner’ for the purposes of the register, according to the proposals.
Tax expert Ray McCann of Pinsent Masons, the law firm behind Out-Law.com, said that the new register would be a “good thing” if it meant that tax evasion was made much more difficult. However, he said that the issues involved in the creation of the new register were “quite complicated”.
“Often with these types of measures benign situations get caught and various complicated rules are then required to ensure that those individuals who set up companies due to security concerns, for example, don’t find that they have a more costly compliance burden,” he said.
“It will also do little to soothe public concern over the tax planning strategies of some very large companies, since even without a register we all know who owns Apple Corporation’s Cayman company, for example. There are probably more ‘shell companies’ in Delaware than the whole rest of the world combined which gives the US a problem in supporting such a measure, so I expect that it will take some time to get international agreement that leads to action,” he said.
What information must be held by the company and Companies House, and how it should be updated, will be confirmed as part of the formal response to the ‘Transparency and Trust’ paper. However, the new disclosure regime could be modelled on that which currently applies in relation to the disclosure of information on company shareholders, the Government said. Companies could therefore be expected to hold information on the names and addresses of beneficial owners, and details of their interest in the company; while Companies House could make names and details of the interest of beneficial owners publicly accessible.
The Government will publish its full response to the paper early next year. This will also address other matters set out in the paper; including a proposal to ban ‘bearer shares’, which are shares which can be transferred without needing to register ownership; and allowing companies to act as directors of other companies.
Limited exemptions from public disclosure will be permitted, for example in cases where it might be necessary to protect individuals whose safety might be at risk, according to the Government. Tax expert Heather Self of Pinsent Masons, the law firm behind Out-Law.com, said that it was essential that the detail of the Government’s proposals worked properly.
“Secrecy has no place in tax planning, but there can be valid reasons for individuals to want privacy over their affairs - for example, if there are concerns over safety and security of family members,” she said.