UK: Government Road Map For Enhancing The Transparency Of UK Company Ownership

Last Updated: 6 August 2013
Article by Bart Peerless


In line with its commitment given at the G8 summit in June 2013, the Government has now published proposals which aim to enhance the transparency of UK company ownership.

The Government's stated aims are to increase trust in UK companies as well as to tackle tax evasion, money laundering and so forth.

At this stage the proposals are merely for discussion and consultation.

The proposals for greater transparency fall into three main parts.

First, where the legally registered owner of shares holds such shares as a nominee for a different beneficial owner, then details of the beneficial owner would have to be notified to Companies House1 where the information would be available to the public.

Second, there is a proposal to abolish so-called bearer shares in particular because under current UK law, the name of a person holding bearer shares does not have to appear on the company's register.

Finally in cases where directors (known as "nominee directors") act on the instructions of someone else it is proposed that the identity of the person exercising actual control must be disclosed to Companies House.

The above UK Government proposals relate only to UK companies. However, they should be viewed in the context of similar commitments on transparency made in June 2013 by all G8 heads of Government2 and also by the UK's Crown Dependencies (Isle of Man and the Channel Islands) and Overseas Territories (which include the Cayman Islands, the British Virgin Islands and the Turks and Caicos). The focus on transparency is thus an international one.

Most professionally advised private clients will either already comply with the new proposals or will have no difficulty in doing so, and will thus not be affected by any changes in the law in this area. However, some private clients, for example, those who for perfectly proper reasons of family confidentiality hold shares through a legal nominee, could be affected by the proposed changes and might need to review the way in which hold their affected assets.

Further detail on UK Government proposals on transparency

Central registry of beneficial share ownership

Under the Government's proposals companies would be required to hold information on their beneficial ownership and to make this information available via a registry at Companies House. The Government's consultation document expresses a preference for the details to be publicly available although the Government is consulting on this issue. An alternative would be for the information to be available only to law enforcement and tax authorities.

In this context "beneficial owner" is defined as anyone with an interest in more than 25% of the shares or voting rights in a company or who otherwise exercises control over the way in which a company is run. Individuals who collectively with others hold more than 25% and agree to vote the shares together would be treated as a beneficial owner. Where company shares are held in trust and the trust has an interest in more than 25% of the shares or voting rights or otherwise exercises control it is proposed that the trustee should be disclosed. Beneficiaries might also be disclosable in certain circumstances, for example, if they had express powers to acquire or dispose of shares (although this seems unlikely unless, say, a beneficiary is also a trustee).

Under the proposals the law would be changed in order to give companies a legally enforceable right to obtain information about beneficial ownership from their shareholders. This would be linked with a legal requirement on companies to identify the beneficial owners of any block of shares representing more than 25% of the voting rights. These measures could be reinforced by placing a new legal obligation on beneficial owners to disclose their beneficial ownership to the company.

A further point on which the Government is consulting is whether the proposals should be extended to other kinds of UK legal entities, such as limited liability partnerships.

Proposed abolition of bearer shares

In the context of the Government's drive for transparency the problem with bearer shares is that legal ownership can be transferred with no requirement to change ownership details on the company register. Moreover the company will not know the identity of the holder unless the holder identifies him or herself to claim a dividend. Even then, their identity would not be recorded on the register of members.

In order to overcome these difficulties the Government proposes that the issue of new bearer shares would be prohibited. Moreover, existing bearer shares would be phased out over a set period of time to allow the holders to convert them into ordinary registered shares. Any bearer shares remaining unconverted at the end of the conversion period would be frozen by the court. Under the Government's proposal the company could apply to the court for the shares to be sold with the proceeds being paid into court. The owner could then apply to receive the proceeds but would have to identify themselves in order to do so.

One issue of potential interest to private clients arising from this proposal is the special UK tax treatment accorded to bearer shares. This is because such shares are treated for some tax purposes as having a location for tax purposes in the jurisdiction where the actual share certificate is kept, rather than where the company register is maintained. If the proposal to abolish bearer shares were implemented, then cases might need to be reviewed where tax planning had been undertaken on the basis of the special tax treatment of bearer shares.

Nominee directors

Although the notion of a nominee director is not defined or recognised in English law, the concept refers to someone who goes on the public record as a director of a company but who in reality has no role in relation to the company which is instead controlled by others. In some cases nominee directors have a recognised and legitimate commercial role, for example, by acting as a director of a subsidiary company on behalf of a parent company. However, since nominee directorships can be used to obscure the real control and beneficial ownership of a company, the Government sees then as being potentially problematical in relation to the G8 commitments on transparency.

To overcome this, the Government consultation includes a number of suggestions on which it seeks views. These include requiring a nominee director who has divested himself of power to direct the company to disclose this fact and provide details of the beneficial owner to Companies House. A more extreme suggestion would be to make it an offence for a director to divest himself of control - although there would need to be exceptions to cater for instances where this was done for legitimate reasons.


The UK Government's commitment to increase the transparency of companies is to be broadly welcomed in underlining the attractiveness of the UK as a well-regulated jurisdiction for investment and business. If the Government's proposals on transparency are implemented, it is possible that some private clients will find that they or their property holding structures will have additional compliance obligations and a few clients who might have relied on the special tax treatment of bearer shares might need to review their tax planning. Furthermore, individuals for whom family confidentially is an issue might need to reconsider how they hold their relevant assets. Overall, however, implementation of the Government proposals in their current form should not be a problem for the majority professionally advised clients.


1 Companies House is responsible for maintaining a publicly available central UK Government registry containing basic information on UK registered companies.

2 The G8 is made up of the heads of Government of Canada, France, Germany, Italy, Japan, the Russian Federation, the UK and the US.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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