Max Hudson, our Head of Corporate talked to The Financial Times about companies failing to identify their shareholders, despite legislation brought in two years ago.
Corporate register shows 13% of companies fail to name ‘persons of significant control’ Naomi Rovnick in London yesterday.
More than 500,000 companies in the UK have failed to identify their controlling shareholders, despite sweeping legislation brought in two years ago to stop British corporations from being used to hide illicit wealth, according to research by NGO Global Witness. Following an in-depth investigation of the corporate register, the anti-corruption NGO also found that thousands of UK-registered businesses had disclosed shareholders that are offshore corporations, instead of people or permitted types of companies, in recent years. Global Witness said that more than one in 10 of the 4.1m corporations registered with Companies House had not revealed their “persons of significant control”.
Graham Barrow, an anti-money laundering consultant who advises some of the world’s biggest banks, pointed to a commonly used loophole that allows businesses to comply with legislation by saying they are “in the process of ascertaining who their person with significant control is”.
The Global Witness research comes two years after a new law was put into place requiring businesses to identify their shareholders. The idea was introduced three years earlier by former prime minister David Cameron, when he pledged to attack the “small minority” of companies that had “hidden their business dealings behind a complicated web of shell companies”. Global Witness said that many of the companies that did not disclose shareholders could have a legitimate reason for doing so. Some widely held corporations, for example, may not have a single investor whose stake or voting rights exceeds the 25 per cent threshold required in the legislation to be designated as a person of significant control. Companies House insisted that only 1.5 per cent of the companies on its register were not compliant with the rules. But Nienke Palstra, a campaigner at Global Witness, said: “Thirteen per cent of the register is a very large amount of companies who are not identifying PSCs.
“And because of the lack of scrutiny that Companies House applies to the information on its register, it is certainly possible that companies not naming a controlling shareholder are doing so to conceal their true ownership.” According to the NGO, there were 13,672 companies on the UK register as of last month that stated they were controlled directly or indirectly by foreign companies that were not a “relevant legal entity”, or a type of corporation that is permitted to be a controlling shareholder under UK law. Most of the controlling corporations were based in offshore jurisdictions commonly considered to be tax and secrecy havens, such as Bermuda and the British Virgin Islands.
More than 9,000 companies on the UK register also revealed people with significant control who were listed as the beneficial owners of at least 99 other businesses. Only one person has ever been prosecuted for filing false company details in Britain.
Whistleblower Kevin Brewer, a 66-year-old businessman, was fined more than £12,000 after he incorporated companies and identified high-profile politicians as their directors, in what he said was an attempt to highlight the ease of faking such information.
Max Hudson, head of corporate law at Al Bawardi Critchlow, said that “companies do not often get confused over who owns them”, although “there are people who do get confused over how to fill in a form correctly”. He added that sophisticated fraudsters “would name a shareholder, just not the real one”.