UK proposal could impact beneficial owners
A UK government proposal to require beneficial owners in companies - including fund managers - to be publicly identified in a central registrar is likely to irk publicity-shy Middle Eastern and Asian investors and could damage UK competitiveness, according to an offshore law firm.
The Small Business, Enterprise and Employment Bill, which is currently in its second reading, aims to bolster transparency by identifying beneficial owners. Those companies listed on the London Stock Exchange and Alternative Investment Market (AIM) will be exempt from the rules. The rules will require firms to disclose shareholders with more than 25 per-cent ownership. It is expected that firms will have to identify the names and addresses of shareholders irrespective of their nationality.
“No other jurisdiction in the world has a publicly accessible register of beneficial owners so this is going one step further. Accordingly, given this is a unilateral move, there is a risk of the UK losing business to its competitors as there is likely to be some reticence from foreign investors on such disclosure. In addition, the rules have not yet garnered much attention and very few law firms have focussed on them given all of the other regulatory developments this year. However, down the line, there may be greater negative reaction as the proposed change heads towards implementation,” said Hughie Wong, partner at Walkers in London.
The government argues the bill will help reduce crime, make law enforcement more efficient and reduce due diligence costs for regulated entities. This comes as governments increasingly demand additional information on end investors as part of broader tax clampdowns.
The Organisation for Economic Cooperation and Development's (OECD) Common Reporting Standard (CRS) will force national authorities in the 51 signatory states to collect and exchange information on taxpayers’ assets, bank accounts and interest payments outside of their home countries as part of the global clampdown on tax evasion in what appears to be a replication of the Foreign Account Tax Compliance Act (FATCA) in the US.
The UK is in the process of creating its own FATCA whereby there will be an automatic exchange of information about UK residents with accounts in the Crown Dependencies, and this is likely to be implemented from 2016. Meanwhile, China is pushing ahead with its Foreign Asset Reporting Requirements (FARRs) which will force its wealthy citizens to publish details of their offshore holdings.