Plans to create a central registry of ‘beneficial owners’ of companies could threaten the UK economy, a committee of the Law Society has warned. The proposal, set out last July by the business secretary Vince Cable in a discussion paper ‘Transparency & Trust’, is intended to ‘inject greater transparency around who really owns and controls companies’.
In its response, however, the Law Society warns that the requirement to identify beneficial owners would put the UK out on a limb internationally, making it a less attractive place to incorporate.
Kathleen O’Reilly, chair of the Society’s company law committee, said that the proposal was incompatible with the government’s ambition to cut red tape for business. ‘With the increased administrative burden, there is a danger that if introduced businesses would locate elsewhere,’ she said.
The Society says that indirect investors in private companies ‘currently have a reasonable expectation that, if they so wish, they will be able to keep their interests private’. It is ‘strongly of the view’ that the register should not be made publicly available. ‘It is a fundamental principle of English law and natural justice that people should be entitled to privacy, unless there is an overriding public interest issue that requires otherwise.’ Even if the proposed register was not published, there would be ‘considerable disquiet’ about the risk of unauthorised leaks.
Chancery Lane also raises concerns about how the register would dovetail with the existing regime of anti-money laundering regulations.
LLPs should be exempt from any such register, the Society says. At present, the lack of any requirement to make public the ownership split between members ‘is an attractive feature’ of LLP status.
One possibility would be for companies to be required to maintain their own lists of beneficial owners rather than creating a central register, the Society suggests.
The Department for Business, Innovation and Skills said it would publish its next steps on the proposals at ‘the turn of the year’.