DBIS discussion paper: Company ownership - Transparency and trust

15 July 2013

This paper considers a range of proposals to enhance the transparency of UK company ownership and increase trust in UK business. The consultation closes on September 16, 2013.

This paper considers a range of proposals to enhance the transparency of UK company ownership and increase trust in UK business. This will help prevent illegal activity; better enable companies to be held to account; and provide businesses, investors, employees and consumers with confidence that companies are acting fairly.

At the UK-chaired G8 Summit in June, the UK committed to introduce new rules requiring companies to obtain and hold information on who owns and controls them; implement a central registry of company beneficial ownership information; and to review the use of bearer shares (which do not require the identity of the holder to be entered in the company’s publicly available register of members) and nominee directors(which can be used to conceal the identity of the person really controlling the company).

This paper invites views on the following areas:

• DBIS proposes that the registry should hold information on the beneficial owners (i.e. on individuals with significant control or influence) of all UK companies, but consider whether companies already subject to stringent disclosure rules should be exempt.
• DBIS intends to give all companies statutory tools to identify their beneficial ownership; and we consider what additional requirements might be required to ensure beneficial ownership information on all companies is indeed obtained.
• DBIS looks at what information should be provided to the registry; how frequently it should be updated; and how to ensure that it is as accurate as possible.
• DBIS considers whether information in the registry should be made public – noting the strong case for openness but recognising that there may be concerns.
• DBIS proposes that the creation of new bearer shares should be prohibited; and that existing bearer shares should be converted to ordinary registered shares.
• DBIS considers options to enhance transparency around the use of nominee directors; and whether companies should be prohibited from being appointed company directors, i.e. whether we should ban corporate directors.

There may be ways to strengthen the system for tackling the small minority of company directors that don’t follow the rules. This is especially important in the light of the company failures during the financial crisis. The paper starts this debate by putting forward a number of proposals:

• Following the Parliamentary Commission on Banking Standards’ recommendation that directors of banks should have a primary responsibility to ensure the safety and stability of their firms, we consider whether to amend directors’ statutory duties in key sectors such as banking and whether to allow sectoral regulators to disqualify directors in their sector.
• DBIS considers what additional factors the court might take into account in director disqualification proceedings, such as the nature and number of previous company failures a director has been involved in.
• DBIS look at options to help creditors receive compensation when they have suffered from a director’s fraudulent or reckless behaviour.
• DBIS proposes that the time limit for bringing disqualification proceedings in insolvent company cases should be extended from two to five years.
• DBIS proposes directors who have been disqualified should be offered education or training to equip them with the skills they need to go on to run a successful company.
• DBIS considers whether individuals subject to foreign restrictions should be prevented from being a director of a UK company; and whether directors convicted of a criminal offence in relation to the management of an overseas company should be able to be disqualified in the UK.

Discussion paper

© Crown Copyright