New company ownership register to track control of UK companies
Business Secretary Vince Cable has announced measures to improve the transparency of who really owns and controls UK companies.
Under the new proposals, the government intends to:
- establish an open, publicly available beneficial ownership register,
- scrap physical ‘bearer shares’ (shares wholly owned by whoever holds the physical share certificate),
- look at limiting the use of companies being directors of other companies, and
- better-educating directors on their duties before they start.
The government hopes that the new proposals will help tackle tax evasion, money laundering and the financing of terrorism, and improve the investment climate in the UK. In addition, it is hoped greater transparency will mean honest entrepreneurs and investors can do business more securely in the UK and not be disadvantaged by those who don’t play by the rules.
The announcement comes in the wake of the announcement earlier in the week (see Government targets reckless directors) that the government is seeking to strengthen director disqualification rules.
The main elements of the company ownership reforms include:
- a central open registry of information on companies’ ultimate controllers and owners maintained by Companies House. The registry would hold information on individuals with an interest in more than 25% of shares or voting rights in a company, or who otherwise control the way a company is run. Companies will need to supply these details to Companies House when starting up and update them at least once every 12 months. This will include details such as the name, date of birth and nationality
- the abolition of bearer shares, given the potential for misuse. Currently, these are shares which belong to whoever owns the physical share warrant. The owner’s identity doesn’t need to be in the company’s register of members, and they can be transferred untraceably. Companies will no longer be able to issue these and existing bearer shareholders will be required to exchange these warrants for registered shares
- limiting the use of corporate directors – a situation where a company is director. An exemption will apply for lower risk examples and this is subject to further discussion with business
making sure that front directors, who often hold multiple directorships, are aware of their statutory duties when they start. The government will not press ahead with a separate register as originally proposed, but will instead look to contact directors to make sure they have understood their duties and the legal ramifications when they start. This will help increase the accountability of those who control a front director
- a replacement to the annual return that gives companies greater flexibility in when they file a return with Companies House. No longer having to keep their own company registers on directors and shareholders if all the information is provided and updated at Companies House. This provision would extend to the beneficial ownership register
- increasing the use of electronic correspondence between Companies House and companies, and
- simplifying filing requirements where directors are appointed and providing a new means of resolving disputes about directors’ appointments.
All the measures included here will require both primary and secondary legislation and will be subject to the Parliamentary timetable.