It’s now even harder to hide corrupt money through complicated company ownership

Following agreement by both Houses on the text of the Bill, the 'Small Business, Enterprise and Employment Act 2015' received Royal Assent on 26 March 2015. The Bill is now an Act of Parliament (law) and regulates aspects of businesses including; appointment of directors, insolvency, company filing requirements and aspects of employment law.  The law aims to address the government's 'Transparency and Trust' proposals by preventing illegal activity such as money laundering and tax evasion.

One significant change in the Act is a new provision to the Companies Act 2006 which requires companies to now maintain a public register of who has significant control over the company, i.e. a register of Persons with Significant Control. A person with significant control is anyone who:

• owns/controls over 25% of shares of voting rights;
• has the ability to appoint or remove board directors;
• has the right to influence or control the company significantly.

The new provision will more easily allow the identification of beneficial owners and controllers of shares within the company, and will place increasing importance on compliance with disclosure requirements, as well as making it harder to hide corrupt money through a complicated and opaque chain on company ownership.

Becoming effective in January 2016, companies will be required to obtain and record information annually and notify Companies House should there be any changes to persons of significant control within the company. Persons with Significant Control (PSC) will also have responsibilities to disclose their identities to the company. Failure to notify Companies House may result in criminal penalties for either the individual or the company; additionally companies have the right to impose sanctions on non-compliant PSCs without having to go to court.

These new rules will increase the requirement for compliance within companies to identify significant controllers, specifically in companies with a complex chain of share owners. In response to these changes, companies and investors will need to begin to prepare by proactively implementing the new laws applicable to them. Companies should familiarise themselves with the legislative changes to understand further how they affect their firms and to provide up-to-date advice to their clients.

The Act has been welcomed by campaigners for transparency into beneficial ownership. Global Witness – an NGO running campaigns against natural resource-related conflict and corruption and associated environmental and human rights abuses – noted:

"The new legislation is very welcome. In particular, we have repeatedly applauded the UK government for showing the leadership required to be the first in the world to propose putting the names of the people behind companies out into the open. Doing so will be a big step forward in preventing people hiding criminal activities such as tax evasion behind anonymous companies." –

Read the Global Witness blog in full here.

Related blogs:

• Lifting the corporate veil: EU aims new AML directive at hidden beneficial ownership
• One basket for the rotten eggs

3 ways you can apply this information right now

1. Better understand your customers, employees and vendors. Lexis Diligence brings together all the intelligence you need in one place to conduct consistent due diligence and comply with anti-money laundering and anti-bribery regulatory requirements.
2. Share this article. Please feel free to share our quality content with your existing contacts and groups to create debate and conversation.
3. Leave a comment below. Let's start a conversation, we'd love to hear your thoughts.