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Street of Shame, Luvvies, Rotten Boroughs & Company Law - 25th April 2014 - Click for larger version Street of Shame, Luvvies, Rotten Boroughs & Company Law - 25th April 2014

Government to introduce company beneficial ownership register

Readers of Private Eye will be well acquainted with the various feature columns of that venerable satirical magazine.

Recently, the “In the City” column has regularly featured the Eye’s intent in exposing the lack of transparency in the ownership and control of UK companies.

The calls for action have intensified after subsequent coverage in national newspapers.

The UK Government has now confirmed its intention to implement a public register of company ownership which will require companies to state the identity of their true owners. The measure is designed to tackle illicit corporate practices such as tax evasion and money laundering facilitated by UK shell companies and other corporate vehicles, the true owners of which are unknown. It is hoped that the public register will boost the trust in and transparency of the UK corporate framework by providing a reliable source of information on the ultimate ownership of UK companies.

To be maintained and updated by Companies House, the register would require UK companies to disclose the details of persons with an interest in more than 25% of a company's shares or voting rights. Consequently, the obligation would be imposed on companies to clearly identify their legal and beneficial owners. The plans also seek to place restrictions on the use of corporate directors, where a company as opposed to an individual is a director of another company. Part of the rationale for both of these proposals stems from the desire to ensure that potential investors are given as much information and certainty as possible over the exact nature and identity of the persons involved in the company in which they intend to inject capital and generate a return.

The proposals suggest further important changes to a company’s filing and reporting requirements. Currently, companies must lodge an annual return (AR01) with Companies House every year. The proposed new rules would provide companies with greater choice and flexibility on how they record and update information with Companies House. Private companies may also be allowed to dispense with their register of directors and register of members (components of the Statutory Registers/Company Books which private companies are currently required to maintain) and instead provide this information through the public registers.

It’s fair to say that opposition has been voiced to the proposals. The Law Society (of England), the CBI and the Institute of Directors have each attacked the plan, noting that it will put British firms at a competitive disadvantage, and the CBI in particular raising security concerns for people on the register if the information is made publicly available.

The proposals have yet to embark on their journey through the parliamentary process so we will follow the progress of matters closely and intend to provide an update over the coming months.

If you would like further advice on shareholder or company matters generally, please get in touch with David Beveridge (db@macdonaldhenderson.co.uk) or Louise Hamilton (louise@macdonaldhenderson.co.uk).

Last updated: 10.13am, Friday 25th April 2014

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