Tracing the asset to the individuals behind corporates

Posted on 28 May 2015

Tracing the asset to the individuals behind corporates

Earlier this year, the UK became the first country to legislate for registers of ultimate beneficial ownership of corporates, and Europe has now followed.  This has important implications for Real Estate businesses operating through structures involving corporates and their private investors. 

The identity of an individual owning land is of course evident at the UK Land Registry or any overseas equivalent.  However, where the register discloses only the name of a corporate entity, only limited information may be available about who really controls it (particularly if the direct owners are offshore entities or trusts). 

Campaigners have been lobbying for public ownership registers as part of a world-wide drive to combat fraud and corruption:  how otherwise (they say) do you really find out who to speak to if a factory pollutes the local environment or collapses killing workers?

From January next year, UK companies and LLPs will be required to maintain registers of "People with Significant Control" (PSCs).  These registers will reveal not only any individual or Government body who (directly or indirectly) owns or controls over 25% of the shares or votes, but also anyone who can appoint or remove a majority of the board, or can otherwise exercise significant influence or control. 

Subject to certain exceptions which are yet to be finalised, corporate directors (directors who are themselves companies rather than human beings) will also be prohibited from October.

It is not just in the UK that the move to transparency is gaining ground over the individual's interests in privacy of their affairs.  Following the adoption of the fourth Money Laundering Directive, public (or close to public) registers look set to become a reality across all European countries by June 2017.  The lobby is also continuing through the G20 and other routes for other countries (particularly the UK Overseas Territories and Crown Dependencies) to do the same. 

Kate Higgins is lead Professional Support Lawyer and Head of Knowledge in the Corporate Department.

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