Most criminals regardless of jurisdiction use corporate structures as the number one vehicle for disguising and moving illicit money around the financial system. The concept of beneficial ownership became popular due to this misuse of companies by criminals to hide their true identities.
As a business owner, we hope by now you should be aware that there have been amendments to the Companies Act to include this issue of disclosing the beneficial owners of a Company. If you are not aware, however, it may be a great time to consider the reasons why your small business should have an accountant or legal professional as an advisor.
So, what do these amendments mean for Limited Liability Companies and should you be concerned? Simply put, there are now new reporting requirements and obligations for directors, officers and shareholders of companies incorporated locally in Trinidad as well as externally formed companies. It must also be stated that failure to meet these obligations can rack up some hefty fines and even jail time.
This article provides clarity on what a beneficial owner is as well as the obligations of directors, officers, and shareholders of a Limited Liability Company.
The Companies Amendment Act 2019
The obligation to disclose and report on beneficial ownership was created by the Companies Amendment Act (CAA) 2019 which was assented to by the Parliament on 4 April 2019 and proclaimed by the President on 30 May 2019. Essentially, the CAA requires companies to ascertain and obtain information on the true (beneficial) owners of a company and disclose the same to the Companies Registry using the prescribed forms.
What is a Beneficial Owner?
According to the Financial Action Task Force (FATF), a beneficial owner refers to the natural person(s) who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted. It also includes those persons who exercise ultimate effective control over a legal person or arrangement.
For the purposes of the Companies (Amendment) Act, the following guidelines apply to ownership and control when determining the beneficial owner of a Company. They are:
- The natural person who directly or indirectly through an intermediate holding company owns shares in the Company;
- In the event that a natural person cannot be identified as the owner whether directly or indirectly, the beneficial owner shall be deemed to be the natural person who exercises control over the Company;
Control is defined by the CAA as:
- The holding of shares or the possession of voting power in relation to that body corporate;
- Any other power conferred by the Articles of Incorporation or other documents regulating the body corporate, that the business affairs of the body corporate are conducted in accordance with the wishes of that person;
Where no ownership or control can be identified the beneficial owner shall be the natural person who holds the position of senior managing official.
Reporting Obligations of Beneficial Ownership
The reporting requirements under the CAA are applicable to all companies incorporated under the Companies Act inclusive of external companies except for publicly traded companies on the Trinidad and Tobago Stock Exchange.
Companies are now required to carry out the following obligations under the CAA:
- Issue a notice via Form 40 to all shareholders of a Company to declare the beneficial owners holding any interest in the said Company;
- Ascertain the names, addresses, occupation, nationality and nature of interest (whether direct or indirect) of each Beneficial Owner with an interest in the Company;
- Maintain a Register of Declarations submitted to the Company by shareholders and beneficial owners;
- Prepare and file to the Companies Registry a Return of Beneficial Interest in the Shares of a Company (Form 45) within 30 days from the receipt of a Declaration of Beneficial Ownership (Form 42) from a Beneficial Owner or receipt of Declaration of Non-Beneficial Ownership (Form 41) from a shareholder.
- Prepare and file to Companies Registry a Return of Issuance or Transfer of Shares (Form 46) within 30 days for the issuance or transfer of shares.
- Verify the recorded information at the Companies Registry via the filing of the new and updated Annual Return (Form 28).
Summary of Penalties for Non-Compliance
The penalties for non-compliance with the disclosure and reporting requirements of the CAA as it pertains to the issue of beneficial owners are as follows:
- A company that fails to take reasonable steps to ascertain its beneficial owners will be guilty of an offence and it, along with every director and officer, will be liable on summary conviction to a fine of $10,000 (and for every day for which the offence continues a further fine of $300) and to imprisonment for three years;
- A person who fails, without reasonable cause, to submit a declaration commits an offence and is liable on summary conviction to a fine of $10,000 (and for every day for which the offence continues a further fine of $300) and to imprisonment for three years.
It is common for company directors and officers to become so consumed in its day to day operations that they lose sight of statutory compliance with the Companies Act. This can lead to major consequences in the forms of tens of thousands of dollars in penalties and fines.
The filing of documents related to beneficial ownership with the Companies Registry is now part of the overall duties and responsibilities of your Company Secretary. At FirstLink Business Solutions Limited, we can assume the responsibilities of your Company Secretary ensuring that your obligations under the Companies Act are carried out. We urge all directors and officers to contact us today to Schedule A Free Consultation.