What is Beneficial Ownership Reporting?
What is beneficial ownership and how it affects directors, shareholders, and the Secretary of the company?
STARTING A NEW BUSINESSBENEFICIAL OWNERSHIP REPORTINGRIGHTS AND RESPONSIBILITIES OF OFFICERS OF THE COMPANY
Who are beneficial owners?
Beneficial owners are the owners of the company who have effective control over an entity either by way of shareholding or effective control even if they are not officially listed as the company's shareholders.
There are cases where beneficial owners that have agreements with the legal shareholders of a company to benefit from shareholding to prevent scrutiny from the authorities. The anonymity that comes with being a beneficial owner, without being a shareholder, can mask conflicts of interest and potential fraud by the beneficial owners.
Is it mandatory to declare beneficial ownership?
In March 2020 the SSM issued a guideline to make it mandatory for all companies to declare the beneficial owners for the sake of transparency in the company management, besides addressing the issues of illegal businesses and shell companies.
Who is responsible for beneficial ownership declaration and/or reporting?
The responsibilities of such declaration fall on the following officers of the company:
Directors: To ensure that the company obtains beneficial ownership information by issuing notices to all legal or named shareholders of the company.
Shareholders: Upon receiving the notice, they have a duty to inform the company whether they are indeed the beneficial owners of the company as described in the Companies Act 2016 and in the guideline. If the shareholders are holding the shares on behalf of another person, they must make a declaration and identify the ultimate beneficial owners.
Company secretaries: Have a duty to ensure that the beneficial ownership information is collected, VERIFIED, and lodged to the SSM.
What is the timeline for beneficial ownership reporting?
For newly incorporated companies, the beneficial ownership information should be obtained within 30 days after the appointment of the company secretary. The Secretary then has 60 days to verify if the information is correct and update the Register of Beneficial Ownership within 14 days. This information should also be lodged together with the Annual Return within 30 days from the anniversary of the incorporation date for existing companies. Companies that fail to reveal their beneficial owners are liable to a compound fine.
Director and shareholder positions can be held by the same or different persons. They have different roles in the company to ensure a smooth and profitable business operation. Hence, it is important to understand the roles and rights of these positions to make sure you are ready to take up responsibilities related to being a director or a shareholder.
Call us at 0192703698 if you would like to know more about beneficial ownership or the rights and responsibilities attached to being named as a director and/or a shareholder.