In my last blog, I looked at automatic exchange of information regimes and this blog carries on the transparency theme but in the sphere of corporate transparency.
Britain is ‘having a transparency moment’, as some might say. Regular readers of this blog will know that Britain has already introduced a public register of beneficial ownership and control of UK companies and Limited Liability Partnerships (see my blog of 24 March 2016), being the first of the G20 countries to do so. However, it appears that matters will not stop there.
In March 2016, the UK Government published a discussion paper on ‘Enhancing transparency of beneficial ownership information of foreign companies undertaking certain economic activities in the UK’. Ownership of UK property by non-UK companies is singled out because of the potentially large sums of money that can be invested in it. The paper reflects on whether information should be made public and indicates that the existence of a public register, or otherwise, in the company’s jurisdiction of incorporation may have a bearing on the matter.
The paper envisages that only new purchases of property would be affected. However, on 19 May, ahead of the international Anti-Corruption Summit hosted in London, Prime Minister David Cameron announced that a public register would be introduced and offshore companies who already own UK property would be included as well. The Government believes that 100,000 properties will be affected.
If you think that all this is a peculiarly British phenomenon though, think again. The Government’s website records that, as at 13 May, 40 jurisdictions worldwide had committed to the automatic exchange of beneficial ownership information, including all three of Britain’s Crown Dependencies (Jersey, Guernsey and the Isle of Man), though not necessarily in the form of public registers. However, it seems that the Government may not have anticipated some opposition. Shortly after the Summit, Jersey Finance (which represents Jersey’s financial sector) questioned whether the measure was proportionate to the perceived threat. However, perhaps its concern that the measure could mark a ‘major reassignment of capital investment away from the UK’ will diminish if the movement morphs into another global standard which many more jurisdictions sign up to. Since then, the Cayman Islands’ premier has indicated the Territory would be reluctant to sign up to exchanging information unless the US does so first and the confidentiality and security of the data exchanged can be guaranteed.
Of course no professional adviser will disagree with the Government’s stated aim of pursuing transparency of beneficial ownership which, according to the discussion paper, is primarily in aid of ‘combatting illicit financial flows’. As the Government admits, the vast majority of offshore companies are used for perfectly legitimate reasons and they, and their shareholders, pay their taxes. However, as the Caymans’ stance makes perfectly clear, exactly who will be responsible for safeguarding that information and how effective those processes will be is also a legitimate concern of families who, for reasons of privacy, use corporate entities to hold their wealth.