From SMP Partners

Key points:
• 4th Anti-Money Laundering Directive effective as from 26 June 2015.
• EU countries to have enacted new rules into their domestic legislation by 26 June 2017.
• Applies to Companies, Trusts, Foundations and similar entities.
• UK register of beneficial owners of UK companies (PSC register) to apply from April 2016 and that information will have to be provided to Companies House from 30 June 2016 (noting that these dates have been extended from the original proposed implementation dates of January and April 2016).

4th Anti-money Laundering Directive (“4th AML Directive”)

The 4th AML Directive requires disclosure of beneficial ownership information to central registers. Individual countries can decide whether or not these registers are public, but as a minimum they must be available to:

i) Competent authorities and FIUs 1 (e.g. EU Revenue Authorities). ii) Obliged entities (e.g. banks).
iii) Any person or organisation that can demonstrate a legitimate interest (e.g. journalist). The information to be disclosed for the purposes of the directive is as follows:

Companies

• Individuals with direct or indirect shareholdings of more than 25% or ownership of an interest of more than 25%.

Trusts

• The Settlor.
• The Trustee.
• The Protector.
• The beneficiaries or class of beneficiaries.
• Any other individual exercising ultimate control over the trust.

In the case of legal entities, such as foundations and legal arrangements similar to trusts, the same or equivalent information will be required.

The information disclosed will as a minimum consist of:

• Name.
Month and year of birth. Nationality.
Country of residence.
Nature and extent of the beneficial interest held.

The disclosure will be required for EU incorporated companies and the disclosure will be made in the jurisdiction in which the company is incorporated.

For trusts disclosures will not be required until the trust generates tax consequences 2. The directive requires reporting for trusts governed under the law of an EU jurisdiction with reporting in the jurisdiction of the governing law. The location of the trustee does not appear to be relevant.

UK PSC Register

Further to the enactment of the Small Business, Enterprise and Employment Act 2015, UK companies will be required to disclose the details of beneficial owners who are persons 3 with significant control (“PSC”). Information on PSCs will be held on the PSC Register at Companies House and will be on public record. The reporting requirement does not currently include limited liability partnerships.

A PSC is a person meeting one or more of the specified conditions:

1. Direct or indirect ownership of more than 25% of a company’s shares.
2. Direct or indirect control of more than 25% of a company’s voting rights.
3. Direct or indirect right to appoint or remove a majority of the board of directors.
4. Has the right to exercise, or actually exercises, significant influence or control over a company.
5. Has the right to exercise, or actually exercises, significant influence or control over activities of a trust or firm which itself meets one of the first four conditions.

The position for companies held directly or indirectly by trusts (or similar) is not clear. The trust would be disclosed and possibly also the settlor and the protector.

The timeline for the new disclosures are as follows:
April 2016 Companies required to keep a register of PSCs.
From 30 June 2016 Companies to file PSC information at Companies House when they deliver their confirmation statement (which replaces the annual return).
30 June 2016 onwards
We would expect the information to appear on the public register soon after it is filed.

The information to be reported for individuals will be as follows:

• Name.
• Service address.
• Country of residence.
• Nationality.
• Date of birth.
• Usual residential address.
• Date on which became a PSC.
• Nature of control.

The residential address will not be on the public register, but foreign authorities will be able to access this information.

2 Jurisdictions may legislate for earlier disclosure dates.
3 Individuals or legal entities.
4 The original proposed implementation date of January 2016 has been delayed until April 2016.
5 The original proposed implementation date of April 2016 has been delayed until 30 June 2016.

For legal entities the information disclosed is as follows:

• Corporate name.
• Registered or principal office.
• Legal form of entity.
• Law under which governed.
• Register of companies in which it is entered and registration number.

Each PSC in a chain of ownership will be reported, for example if an individual owns 100% of the shares of a BVI company, which owns 100% of a UK company, then both the BVI company and the individual would be included on the register as PSCs.

It should be noted that UK companies cannot change their statutory seat. A UK company made tax resident in another jurisdiction would still be UK incorporated and subject to the new rules.

We await further secondary legislation/guidance to set out the details of how the new regime will operate in practice and this is expected to be released in the Autumn.

Other changes introduced by the Act

• As of May 2015 no further bearer shares can be issued by UK companies and existing bearer shares to be subject to a 9 month transitional period.
• As from October 2016 6 no further corporate directors on UK companies (subject to limited exemptions). One year transitional period for existing corporate directors.

Further changes

• The Government is widely expected to introduce further measures in due course (subject to consultation and modifications to relevant legislation) [noting that the dates are still provisional].
• Limited Liability Partnerships (LLPs) to hold a PSC register from January 2016.
• In accordance with the 4th AML Directive, PSC entries to be submitted to Companies House on a current basis (rather than on an annual basis) from 2017.
• Extension of the PSC scheme to Scottish Limited Partnerships and some other entities from 2017.

6 The restrictions on corporate directors have been delayed from October 2015 to October 2016.

For further information please contact your usual SMP adviser or email [email protected].

SMP Partners
Clinch’s House, Lord Street, Douglas, Isle of Man IM99 1RZ Tel: + 44 (0)1624 683 242
Fax: + 44 (0)1624 612 624
l: [email protected]
w.smppartners.com

The information in this publication is intended for general guidance only and should not be applied to individual circumstances without professional advice. No liability or responsibility for loss to any person acting, or refraining from action, on the basis of any material in this publication can be accepted by any member of the SMP Partners Group of Companies. © SMP Partners 2015.

SMP Partners Limited, SMP Trustees Limited, SMP Fund Services Limited and Amber Business Limited are licensed by the Isle of Man Financial Supervision Commission. SMP Accounting & Tax Limited is a member of the ICAEW Practice Assurance Scheme. SMP Capital Markets Limited. SMP Yacht and Aircraft Limited. SMP Partners SA and SMP Trustees SA are members of the VQF Financial Services Standards Association. Kenforth Life Insurance Limited is licensed in the Bahamas by the Insurance Commission of the Bahamas. The SMP Partners Group is a member of Russell Bedford International, with affiliated offices worldwide.
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The original document can be downloaded at: http://www.smppartners.com/cmsAdmin/uploads/disclosure-of-beneficial-owners-of-eu-companies_trusts-and-foundations.pdf