Companies (Beneficial Ownership) Act 2012
The Act requires every company that is not the client company of a Corporate Service Provider or covered by an exemption in the Act or the Companies (Beneficial Ownership) (Exemptions) Order 2013 (SD 235/2013) to appoint a 'nominated officer'.
Background to the legislation
The Isle of Man has worked hard to ensure that the international community recognises that it conducts its affairs in an open and transparent manner. Part of this requires the Isle of Man to submit to inspections conducted by supra-national bodies such as the International Monetary Fund ("the IMF") and the Organisation for Economic Cooperation and Development. If the Isle of Man is to continue to survive and thrive in an increasingly competitive world, it is vital that it constantly re-evaluates its position and seeks to make improvements where indicated.
In 2008/2009 the IMF conducted a Financial Sector Assessment Programme on the Isle of Man which considered, amongst other things, the Island's compliance with international standards for anti-money laundering and countering the financing of terrorism.
The IMF's 2008/2009 report suggested that the Island should take steps to address a deficiency in relation to the information relating to the beneficial ownership and control information held on certain companies incorporated under the Companies Act 1931.
Under the Companies Act 2006, every company must retain the services of a registered agent who must be a Corporate Service Provider, licensed by the Financial Supervision Commission. All Corporate Service Providers have an existing obligation to identify and hold information on the beneficial owners of companies under the Anti-Money Laundering laws of the Isle of Man.
The majority of 1931 Act companies in the Island are clients of licensed Corporate Service Providers who will hold information on the beneficial owners of the companies. However, there is no legal obligation on a locally owned and managed trading company not associated with a Corporate Service Provider to hold information on the beneficial owners of the company. For these companies, it is likely that the shareholders (owners) will also be the directors and secretary of the companies.
There is currently no way to determine how many of these locally owned companies there are.
In its final report the IMF requested that "the authorities should seek to put in place measures to ensure that accurate, complete, and current beneficial ownership information is available for all 1931 Companies".
The Act addresses the recommendations the IMF with a commonsense solution that minimises the effects felt by the Isle of Man, its business community and its residents.
What is beneficial ownership?
Most people looking at a shareholder list on a company file will assume that the person named as shareholder actually owns the shares recorded against their name and that they will be the person receiving any dividend or share of the profits.
In the Act, "beneficial owner" means the person who actually owns the shares (whether or not this is the name recorded in the company's share register).
The Act does not introduce any new powers for law enforcement bodies to obtain beneficial owner information. It simply introduces a new requirement for a person to know that information. That person is the 'nominated officer'.
Requirement to have a nominated officer
The Act requires every company that is not covered by an exemption in the Act (see note 1) or the Companies (Beneficial Ownership) (Exemptions) Order 2013 (SD 235/2013) (see note 2) to appoint a 'nominated officer'.
The nominated officer must be an individual who is resident on the Isle of Man. There is a statutory obligation on the members of a company to provide the nominated officer with details of the beneficial owner of the shares if it is not them.
The nominated officer needs to be told the name, residential address, nationality and date of birth of the beneficial owner if it is an individual. Or, the name, jurisdiction of incorporation, registered or principal office address and the type of company if the beneficial owner has legal personality but is not an individual.
Appointment of the Nominated Officer
By Monday 2 September 2013 every company that is required to have appointed a nominated officer should have done so. An existing company does not have to notify the Companies Registry of the appointment of its nominated officer until it submits its next annual return that is due in the year commencing 1 September 2013.
An amended annual return form to be used after the 1st September 2013 is available.
Annual Return of a company not having share capital or limited by guarantee and having a share capital from 1st September 2013
As a number of companies annual returns are printed from a secretarial package and it may take some time to programme these changes the Companies Registry are also making available an insert, just dealing with the nominated officer that can be inserted into an existing annual return.
Once a nominated officer has been appointed, any subsequent change will need to be notified within 1 month of the change on the form NO in the same way you notify a change of director or secretary.
From the 1st September 2013 every new company incorporated, that is not exempt from the requirement to have a nominated officer must include details of the nominated officer in the application for incorporation.
The company must maintain a record of the name and home address of the nominated officer in the Island. Or, the name, and business address if the nominated officer has legal personality but is not an individual.
The company must also notify the Companies Registry about any change to the nominated officer or their particulars within one month in a change.