Following the commitment by all UK Overseas Territories to make the ownership of companies in their jurisdictions more transparent, the British government has released a draft Order in Council setting out how it expects the OTs to implement publicly accessible registers of beneficial ownership.
However, the UK is holding off an Order in Council that would directly establish beneficial ownership registries in its territories.
In a written statement to the UK Parliament, Wendy Morton, Minister for the European Neighbourhood and the Americas in the Foreign, Commonwealth & Development Office, said: “The draft Order sets minimum requirements for what the UK Government deem to be a compliant publicly accessible register of company beneficial ownership in the Overseas Territories.
“This includes the form that the register must take and the information that must be made available such that it would be broadly equivalent to that available in accordance with the provisions of Part 21 A of the UK Companies Act 2006.”
The draft Order defines beneficial ownership as both direct and indirect control, for example through shareholdings, voting rights or the right to appoint or remove a majority of directors.
Where an Overseas Territory attaches a percentage to the type of control, the draft Order stipulates that this cannot be higher than 25%.
The information on an individual must include their name, country of residence, nationality, month and year of birth, and the nature of their control over the company.
Morton said it is the government’s view that only those Overseas Territories with companies registered in their jurisdiction need to produce registers, and that Territories’ registers should be a proportionate reflection of the number of companies registered in their jurisdiction.
The Cayman Islands had 111,536 registered companies at the end of the third quarter 2020.
“By introducing publicly accessible registers of beneficial ownership, the Overseas Territories are showing that they are responsible jurisdictions and a collaborative partner to the UK,” the minister said.
She said the registries build on the Exchange of Notes arrangements under which the Overseas Territories must share company beneficial ownership information with UK law enforcement agencies within 24 hours and, in urgent cases, within one hour.
“A statutory review of these arrangements last year found that they are working well and are providing our law enforcement with invaluable information to support ongoing investigations,” she said.
Given the firm commitment from all Overseas Territories to adopt beneficial ownership registries, Morton said the UK government has decided “that it is now not necessary to make the Order under Section 51, but will keep this under review”.
Section 51 of the UK Sanctions and Money Laundering Act 2018 called on the secretary of state to directly establish beneficial ownership registries in the territories, if they had not done so by the end of 2020.
However, the UK and its territories later agreed that the Order in Council would instruct the British OTs to establish by 2023 fully operational public registers of beneficial ownership.
In a statement, the Cayman Islands government acknowledged the progress made by the UK Overseas Territories in regard to beneficial ownership and the UK’s decision to draft, but not enact, an Order in Council.
Cayman’s government also reaffirmed its 9 Oct. 2019 commitment to introduce a public register in line with evolving international standards and global best practice.
Cayman Finance said in a statement that “the draft order was required by law, but the UK’s certainty that the Cayman Islands, and the other OT’s, are on track to meet their commitments obviated any reason to enact it”.
For global investors, the practical effect of the UK’s action is that Cayman’s existing verified beneficial ownership regime will remain in effect until the Cayman Islands government implements an enhanced system in 2023.
The organisation that represents Cayman’s financial services firms said, “The Cayman Islands financial services industry will continue to collaborate with the Cayman Islands Government to establish this new public register of beneficial ownership, which will reflect the unique nature of our industry while providing information broadly equivalent to that required under the UK’s own Companies Act.”
Earlier this year, the British Virgin Islands became the last territory to commit to establishing a register. “This is a major change, and the unanimous action from all the Overseas Territories demonstrates their commitment to tackle flows of illicit finance,” Morton said.