Ownership register will list 'people with significant control'

The legislation follows a key pledge made by prime minister David Cameron during the UK's presidency of the G8 last year. The UK, like other large economies, is working to force other jurisdictions into complying with its notions of tax transparency. To achieve this, Cameron's government needs to present the UK as having clean hands and a strong regime against the misuse of companies whose beneficial owners are secret.

A consultation was held last summer, and in April this year the Department for Business, Innovation and Skills (BIS) published its plans for an open registry of company beneficial ownership – including companies ostensibly controlled by trusts. The details are set out in the new bill published this week. According to BIS, it will 'enhance the reputation of the UK as a trusted and fair place to do business by increasing transparency around who owns and controls UK companies; and help deter and sanction those who hide their interest in UK companies to facilitate illegal activities or who otherwise fall short of expected standards of behaviour'.

However, the original target of 'beneficial ownership' does not appear in the legislation. Instead, it has been replaced by the phrase 'people with significant control' or PSCs. These are defined circularly in Schedule 1A of the bill as people who have 'significant influence or control' over the company, though the bill does promise that guidance will eventually be published about the meaning of this phrase.

Moreover, it turns out that, after all, companies will not be forced to record their PSC details on a central registry. Instead they can keep private records and release them only on request, and then only if a court orders them to do so.

***Correction 30/6/2014 - Initial reports indicated that the proposed UK register of corporate beneficial ownership would not be a central register but instead based on information held by the companies themselves. Further examination of the draft legislation (particularly Schedule 1B Part 2) suggests however that companies will indeed have to file beneficial ownership information with the Registrar of Companies at Companies House as well as maintain the data themselves.***

The substance of the measures is in Schedule 3 of the bill. It requires companies to collect information about their PSCs, and imposes corresponding duties on others to supply it. Essentially, the company must write to anyone whom it thinks may qualify as a PSC or who may know someone who qualifies, asking if the person agrees. The person must reply and give appropriate identification details. Public companies will have to maintain this information themselves in their own private registry. They must disclose it to the public on request, though all such requests must state their purpose, and the company can apply to a court to refuse a request it considers improper.

Privately owned companies must collect the same information. However, if they do not wish to handle the associated requests from the public, they can instead elect to report their PSC information to a central registry maintained by an official registrar. They must notify the registrar of any changes to the PSCs, and they can withdraw their election at any time and keep a local PSC registry instead.

There are also provisions for excluding certain material from the publicly available information. This includes PSCs' residential addresses as a matter of course, but a PSC can apply to the registrar to have any other details withheld on specified grounds.

The measures will be discussed in Commons Committee in the autumn, after which the bill will go to the House of Lords for debate. BIS says it is still seeking views on some aspects of the company transparency requirements, which will be implemented through secondary legislation 'as soon as practicable' after enactment.

• The bill also prohibits the issue of bearer shares, limits the use of corporate directors and introduces new measures for the disqualification and punishment of unfit directors.

Sources

• UK government
• UK government (text of bill, PDF file)
• STEP UK news story of 24 April 2014