The government has announced its intention to proceed with its plans to end “the darker side of capitalism” by introducing a public register of company beneficial ownership. The intention is to increase the transparency in the ownership and control of companies and thus extending its fight against tax evasion and corporate corruption.
Possibly the most significant of the government’s proposals is the introduction of a public register of beneficial company ownership, to highlight the ultimate owners of UK companies. Companies will be required to obtain and hold information about their ownership and control and to provide Companies House with details of anyone who has an interest in more than 25% of the shares or voting rights of the company, or who otherwise exercises control over the management of the company.
The register should include the beneficial owner’s full name, address and details of their shareholding, as well as the beneficial owner’s nationality, date of birth, usual country or state of residence and their service address. This information will need to be updated at least once every year and will be assessable at Companies House by the public.
The government also intends to proceed with the proposal to prohibit the creation of new bearer shares and intends to specify a period of around 9 months during which existing bearer shareholders must surrender their bearer shares for conversion to the relevant registered shares. This would seem to bring an end to the usefulness of any existing nominee arrangements in place.
Further to these plans, the government also intends to ban corporate directors, subject to certain exemptions, making it easier to establish the true directors of a company.
The proposals are set to apply to all UK companies and to limited liability partnerships (LLPs). However, the government intends to grant an exemption for public companies listed on a regulated market (e.g. the main market of the London Stock Exchange).
Campaigners have called the plans an “historic step” in the fight against corruption. In addition to this, the business secretary, Vince Cable, said: “The UK is already one of the best places in the world to start, grow and run a business. However, for consumers, investors and the wider public to really trust a company they need to know who is really in charge. This is why I’m making sure we take tough action tackling the darker side of capitalism and the smoke and mirrors which have existed for too long. No longer will UK companies be able to use complex structures and trails of paperwork to hide information and keep the public in the dark.”
However, there has been criticism of the plans, including from the Law Society. The Law Society said 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.”
If you would like to speak to one of our specialist team of business solicitors to find out how these changes might affect your business please get in touch.