A review of the ASIC Annual Report 2018 by a parliamentary committee was tabled only in February 2020.
The report has a section headed:
‘What has happened to the beneficial ownership of shares register?’
The committee asked ASIC for its view regarding the establishment of a beneficial ownership register, as the report says, ‘to make clear who really owns shares, rather than allowing shell companies to hide the true owners of firms’.
ASIC advised that beneficial ownership requirements were in place in the past but were removed. However, it noted that Treasury had recently conducted consultations on some beneficial ownership requirements being reinserted into the law to assist in combating financial crimes.
ASIC told the committee that there are practical challenges to beneficial ownership reforms, such as the difficulty of enforcing the provisions for international shareholders as well as the difficulty of gathering information about ownership structures from overseas jurisdictions.
ASIC explained that companies can seek to trace the ownership of certain shareholdings using ownership tracing provisions in the Corporations Act. Furthermore, if satisfactory answers about ownership cannot be found, companies can approach ASIC, which has powers to trace share ownership.
ASIC advised that the issue of beneficial owners is ‘effectively’ addressed by the current substantial shareholder regime.
It said that the Corporations Act requires a person to make a substantial holding disclosure once a person (together with their associates) has relevant interests in voting shares or interests carrying five per cent or more of total votes.
ASIC acknowledged that a beneficial ownership register may provide benefits to regulators ‘but whether there’s any benefit for a consumer to know that Fred Smith or somebody else has got three per cent or two per cent of a company I think is a really interesting question’.
However, ASIC noted that there is mixed feedback from business regarding whether beneficial ownership provisions would be useful for the operation of business more broadly.
Again, ‘what has happened to the beneficial ownership of shares register?’
ASIC’s views and responses need some more added.
As I said 3 years ago – Beneficial ownership of companies, and access to ASIC data – the idea of a beneficial ownership register for companies has now been the subject of consideration by a number of inquiries in Australia:
- anti-money laundering and counter terrorism financing laws;
- the 2015 Senate Report on Insolvency in the Australian Construction Industry;
- anti-phoenix reforms; and
- the director identification number (DIN).
As I also said, even if there were a register, it would probably only be accessible for a fee.
The United Kingdom also has its national register of beneficial ownership introduced through its Small Business, Enterprise and Employment Act 2015.
Having successfully established its register, the UK government is now going further to introduce what it says is the world’s first public Register of Beneficial Owners of Overseas Companies and Legal Entities, being bodies that own UK property or participate in UK government procurement. In the UK, company records are public records accessible for no charge.
More details are at this House of Commons Briefing Paper 8259 – Registers of beneficial ownership, 7 August 2019.
The committee and ASIC could usefully read more widely.
In any event, it appears no progress has been made in creating such a register in Australia: Establishment of a Beneficial Ownership Register (BOR), August 2019.