2017 already looks like being a busy year for Tynwald, the Island’s parliament, but one of the most important bills likely to be introduced into the House of Keys in the next few weeks is the Beneficial Ownership Bill, which is arguably the most critical piece of legislation for the financial services sector since the Financial Services Act became law in 2008.
A central register of corporate ownership
In April 2016, the Isle of Man Government made a commitment to the UK that by the end of June 2017 it would introduce a centralised register listing those individuals who ultimately own legal entities incorporated on the Isle of Man. The Government published a consultation document on 4 November 2016 which contained a draft Beneficial Ownership Bill 2017 (the “Bill”) and invited comments from industry and the public on the detail of the proposed legislation and its potential impact on the Island’s reputation as a responsible and highly-regulated jurisdiction. The consultation closed on 16 December 2016. As the Bill only captures entities which have their own legal personality, it is important to note that trusts are excluded from its scope.
The main objectives
The principal purpose of the Bill is to ensure that the Isle of Man meets acceptable international standards of anti-money laundering and countering of terrorist financing by maintaining a centralised database of corporate beneficial ownership which, although not publicly available, will be accessible to UK law enforcement agencies for the purpose of combatting financial crime. The threshold of beneficial ownership is 25%. Each legal entity must appoint a ‘nominated officer’ who is responsible for submitting the required ownership information each year. Those entities which already have a nominated officer pursuant to the Companies (Beneficial Ownership) Act 2012 will not have to appoint an additional nominated officer, although that Act will be repealed when the Bill becomes law.
The Isle of Man is certainly not alone in addressing the vexed issue of beneficial ownership. Many other jurisdictions are considering the issue at the present time and some have already introduced similar or equivalent legislation. The UK has already introduced a register of ‘persons with significant control’ which is publicly searchable on the UK Companies House website.
DQ’s Adam Killip attended the Offshore Alert conference in London in November 2016 and it was apparent from this conference that due to the ever-increasing volume of information available to tax authorities as a result of the exchange of tax information under the Common Reporting Standard (CRS) and US FATCA, the number of investigations and follow-up requests from foreign authorities is only likely to increase. The Isle of Man must position itself at the forefront of tackling financial crime in order to maintain its hard-earned status as a professional and responsible place to do business.
Some issues for Tynwald to consider
Although DQ understands that Tynwald is keen to enact the Bill in short order, there are several aspects of the Bill which are unclear and which will need to be addressed in more detail in order to provide more clarity to those who deal with corporate structures. In particular, it is unclear how the 25% threshold will apply in practice where there is a particularly complicated corporate structure or where an Isle of Man company is ultimately owned by a trust. In addition, as presently drafted, it is not clear whether the beneficial ownership register will only be accessible by UK law-enforcement authorities or whether equivalent bodies in other countries will be able to request information as well. Furthermore, there is ongoing debate about the inclusion of collective investment schemes within the scope of the Bill and it is not clear how some of the offences which pertain to legal and intermediate owners of structures would be enforced where these parties are not Isle of Man resident.
When will the Bill become law?
The consultation document envisages that the Bill will become law by early summer and that the beneficial ownership register will ‘go live’ on 1 July 2017, with a phased introduction in the first year to allow for nominated officers to submit the necessary beneficial ownership information as part of each legal entity’s annual return.
DQ has a specialist team of corporate and trust lawyers who would be pleased to answer your queries about any aspect of Isle of Man company and trust law. For further information, please contact Mark Dougherty or Annemarie Hughes. For further information on the Beneficial Ownership Bill 2017, please contact Libby Gordon or Adam Killip.