More moves towards transparency of company ownership
The move towards transparency of company ownership with a view to preventing corporate structures from hiding links to criminal activities and tax obligations continues. In the UK we already have the PSC regime in force and new moves are afoot in relation to foreign companies which purchase land or property in England and Wales. Both France and the Netherlands committed publicly to bringing in a public beneficial ownership registry in May. Now the European Commission has published a proposal for a directive to amend the Fourth money laundering directive to make beneficial ownership information available to the public.
Since 6 April Companies and limited liability partnerships that fall under the new PSC regime have been required to keep a register of persons with significant control over them. See our client note for detailed information about the new regime. Companies incorporated before 30 June this year now have to provide this information to Companies House in their first confirmation statement (which has replaced the annual return) and companies incorporated after 30 June have to provide this information on incorporation (see our earlier article for more details).
BIS Discussion Paper on enhancing beneficial ownership of foreign companies Back in March this year, the Department of Business, Innovation and Skills (BIS) issued a Discussion Paper which outlined a range of proposals to enhance the transparency of beneficial ownership for foreign companies that purchase land or property in England or Wales or who participate in public contracting with the government in England. This includes providing details of beneficial ownership on a central register, the intention being to expose who really owns foreign companies in order to prevent the UK from being a safe haven for corrupt money (see our previous article).
Recently, the Minister for State of BIS confirmed that the government will be undertaking a formal consultation on these proposals during 2016. The Minister also confirmed that the proposed new regime would require foreign companies that are affected to provide details of their beneficial owners for inclusion in a public register. This would be the first such register of its kind in the world.
European Commission proposal to amend the Fourth Money Laundering Directive
The European Commission recently published a proposal for a directive to amend the Fourth money laundering Directive (fourth MLD) and the First Company Law Directive which will see the introduction of measures similar to those of the UK's PSC regime. Briefly the proposals include:
- Currently under the fourth MLD information on beneficial ownership of companies and trusts is accessible to competent authorities and to those who need to check the information for customer due diligence purposes. Under this new proposal Member States must ensure that information relating to beneficial ownership of corporate and other legal entities (other than those which are non-profit making) is publicly available. The threshold for the definition of beneficial ownership remains at 25%, as it is under the PSC regime, for most companies but the definition has been amended to provide that those beneficial owners who have a 10% ownership in certain companies that are at risk of being used for money laundering and tax evasion must be included in the registers. This change will be brought about by an amendment to the First Company Law Directive.
- Information relating to the beneficial ownership of certain business – related trusts and other types of legal arrangements having a similar structure or function is also to be made publicly available although access will be restricted to those who can demonstrate a legitimate interest in seeing it
- Exemption from public disclosure may be sought where access to the information would expose the beneficial owner to risk of fraud, kidnapping, blackmail, violence or intimidation or where the beneficial owner is a minor or otherwise incapable
- The information will continue to be available for 10 years after a company has been struck off the register
The Fourth MLD came into force on 25 June 2015 at which time Member States had two years to implement the directive. Now, however, there is a strong recommendation from the Commission that the transposition date be brought forward to 1 January 2017 (previously 17 June 2017). If this happens Member States will need to implement the directive by 1 January 2017. Despite the referendum vote for Brexit in the UK, the UK will still be part of the EU at that time so some implementing legislation is still likely where the substance of the fourth MLD is not already covered by the PSC regime. For further details, please click here for the proposed directive, here for the factsheet, and the press release can be found here.