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In its latest Discussion Paper (deadline for responses is 16 September if you want to have your say) on Transparency and Trust in the business markets BIS is proposing a central registry of beneficial owners for companies. They want to get to the bottom of who really owns what in UK companies. (Interests in land and immoveable property are not included in any proposals.) Whilst not finally decided, it seems they are looking at identifying those who ultimately hold 25%+ of the shares/voting rights/control of companies.
There are some legitimate concerns about this.
Sounds like a nice problem to have but it is not uncommon. For example, many of us invest in a small way by way of ISAs. Admittedly, it is unlikely that we would fall above the threshold listed but I imagine you don't know precisely which companies are being invested in on your behalf. This may also be the case for some larger more sophisticated fund arrangements. Here, also, investors tend to hand these decisions to fund managers and may not know at any one time exactly which companies they are investing in. The problem of inadvertent non-disclosure is a very real one here.
Trust ownership of companies is a regular feature of our corporate landscape. In a discretionary trust (as its name suggests) who ultimately benefits from the trust is at the discretion of the trustees. There will often be a class of potential beneficiaries e.g. the children or grandchildren of the settlor of the trust. Advisers in this area are concerned about possible unintended consequences here.
If this class of possible beneficiaries has to be declared, what might happen? Would one of those beneficiaries spend money now (that they don't have) thinking that they will receive it? This could negate the whole purpose of this type of trust as well as potentially have a detrimental impact on the value of the trust investments.
The Company Law Committee of the Law Society will be responding to the Discussion Paper and highlighting some of these issues. If you are worried about any of the proposals we would encourage you to have your say as well.
KOR - 16 August 2013
The only book available that deals exclusively with such companies