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Beneficial ownership of companies, and access to ASIC data

The government has invited us to “have our say” on what it says is “Australia’s first Open Government National Action Plan”, the draft plan being opened for public consultation on 31 October 2016.  This express the government’s “ambitions” in a number of worthwhile areas.

A beneficial ownership register for companies

Many aspects of the Plan are worthy of comment, [some are addressed at the end of this article], but a particular proposal is for a beneficial ownership register for companies.

The international Financial Action Task Force (FATF) has defined a beneficial owner as

“the natural person(s) who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted (…)”.

A UK parliamentary report explains that “there are longstanding concerns that, when companies, land or real property are bought through shell companies, so disguising their true ownership, the resulting lack of transparency may allow corruption or crime to flourish”.[i]

A further issue is whether such information should be published and easily accessible to the public.  As the UK report says, this remains “contentious”.   

After an international anti-corruption meeting held this year, referred to in the Plan, a number of countries signed up to a pledge to share registers of beneficial ownership, though one country that did not was the US, or tax havens like the British Virgin Islands, which also did not sign up to sharing information. The countries that said they were ‘considering moving towards’ public registers of beneficial ownership were Australia, New Zealand, Jordan, Indonesia, Ireland, Argentina and Georgia; the respective country statements released after the summit generally speak in terms of “exploring” feasibility.

In response to that gathering international momentum, the Australian government has acknowledged in its Plan that disclosure of the names of the true owners would ensure information on beneficial ownership and control of a company is “available to competent authorities in Australia”, for example the ATO. For example, the register would assist regional and international sharing of information between the ATO and other tax authorities.  Public disclosure would be another step.

Consultation on beneficial ownership disclosure is to begin by the end of 2016.

Comment

The idea of such a register is not new, and has now been the subject of consideration by a number of inquiries in Australia – tax evasion, anti-money laundering, phoenix activity, and more.   

Anti-Money Laundering

A major report on our Anti-Money Laundering and Counter Terrorism Financing Act 2006 was tabled in parliament in April 2016. It commented on the limited information available about the true ownership of Australian companies in the AML/CTF context. In contrast, the Report noted that a number of countries have already seen the benefit of such disclosure in assisting in AML/CTF monitoring and compliance and have, or are well progressed, implemented such disclosure.   

UK

The United Kingdom has created a national register of beneficial ownership through its Small Business, Enterprise and Employment Act 2015.  Most UK companies and LLPs are required to keep a register on which must be recorded the names of the individuals who are the ultimate beneficial owners and controllers – ‘persons with significant control’ (PSC).  

The PSC disclosure includes an individual who, directly or indirectly, holds more than 25% of the nominal share capital of a company; or controls more than 25% of the votes at general meetings; or is able to control the appointment or removal of a majority of the board; or who exercises significant influence or control over the company. 

Existing recommendations in Australia

Our 2015 Report on Insolvency in the Australian Construction Industry, of the Senate Economics References Committee, recommended [no 35] that the government establish a register of beneficial ownership. The Report said that this would be consistent with the recent work of the G20 nations concerning the importance of transparency in corporate structures, not only in the context of AML/CTF obligations, but also in the administration of global taxation laws.

Another benefit would be to counter unlawful phoenix activity, a particular focus of that inquiry. 

But the Senate Committee said that such a register should be coupled with a Director Identification Number (DIN), that is a numbered register of directors’ names.  Independent verification of owners was required, and as the collector of company information, the Senate Committee recommended that ASIC should take on that task. 

The DIN has also been recommended by the Productivity Commission’s Report 75, of 2015; and by the first report of the Senate Committee inquiry into corporate taxation. 

Free access to ASIC data

The Senate Committee went further, saying that much corporate data is only available from ASIC for a fee.  It recommended that ASIC provide access to its company register free of charge, in the same way that company records are accessible free of charge through the UK Companies House. That appears to accord with other proposals in the Plan, including the need for open accessibility of public data.

FSI Report 2014 and the Productivity Commission data inquiry of 2016-2017

This is supported by the need for corporate transparency raised in the 2014 FSI Report which then led to the Productivity Commission’s current inquiry into Access to Data, its draft report now released this month, November 2016.

ASIC registry tender

It seems to follow that the Plan should cause the government to revisit the tender for the ASIC registry, or to ensure that the government’s very worthwhile ideas in the Plan for access to public data are not compromised by the tender conditions, and terms are put in place that are supportive of the government’s ambitions.

[i] See Shining a light on beneficial ownership: what’s happening in the UK and elsewhere?, House of Commons Briefing Paper 07616, 17 June 2016. It fully explains the English position.

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