""Whilst Guernsey is already recognised as having extremely high standards of transparency, its legislature continues to explore measures aimed at ensuring that it remains at the forefront of international standards.""
""Under the new proposals the new register will apply to all legal entities in Guernsey.""
""Along with civil penalties up to a maximum of £20,000, criminal penalties and sentences of imprisonment up to a maximum of 2 years will apply for serious breaches of obligations in relation to beneficial ownership information.""

Guernsey register of beneficial ownership

17 Feb 2017

Guernsey's Policy and Resources Committee has recently submitted its proposals for the establishment of a register of beneficial ownership for consideration by the States of Guernsey at its sitting on 15 February 2017. Following consultation papers issued in May 2015 and 2016, the States has now approved the Committee's proposals in principle and issued draft legislation for the establishment of a central register with the stated aim of maintaining Guernsey's commitment to meeting international standards aimed at tackling financial crime.

Key features:

  • Register to be applicable to all forms of legal persons in Guernsey
  • Not publically accessible - information on it will be secured and treated as confidential
  • Direct access for the Bailiwick's law enforcement bodies and the Guernsey Financial Services Commission ("GFSC")
  • Legal gateways to be established to permit sharing of such information with domestic and foreign authorities
  • Office of Registrar to be established with oversight and enforcement powers including the ability to impose administrative financial penalties
  • Criminal and financial penalties to be imposed for breach of obligations in respect of beneficial ownership information
  • Resident agents' powers to obtain, provide and retain beneficial ownership information to be extended and a statutory process for their resignation to be put in place
  • Express statutory prohibition on the use of all bearer instruments, including bearer warrants

The establishment of a register of beneficial ownership has preoccupied Guernsey legislators since David Cameron's announcement in 2013 that the UK was intending to set up its own central register there, at the same time urging Guernsey, Jersey and the Isle of Man to do the same.   Whilst Guernsey is already recognised as having extremely high standards of transparency (as demonstrated by the recent MoneyVal evaluation report published in 2016 and its inclusion on the OECD 'white list' of cooperative jurisdictions) its legislature continues to explore measures aimed at ensuring that it remains at the forefront of international standards.

Given the comprehensive work already done by Guernsey in this area (where there already exist obligations on resident agents to obtain beneficial ownership information for certain legal entities and provide it to the authorities on demand), the proposed regime will not, in actual fact, involve a major departure from the current, well established position.  What it will do, however, is ensure that such information will soon be held centrally, thereby streamlining the authorities' ability to access it.  Additionally, as well as extending the requirements to all legal entities registered in Guernsey, it will create a mechanism for oversight of the process by enhancing the existing beneficial ownership obligations on resident agents alongside their powers to obtain such information from the companies they are responsible for.

Draft legislation, providing much of the technical detail for the establishment of Guernsey's Register, is currently at the consultation stage.  Although we will have to await the results of the consultation, currently the key features of the proposed new regime are as follows:

Legal persons
Guernsey companies and limited liability partnerships are already required to appoint either a licensed corporate services provider or locally resident official to act as resident agent under the Companies (Guernsey) Law, 2008 ("Companies Law") and the Limited Liability Partnerships (Guernsey) Law, 2013 ("LLP Law").  The resident agent is required to take reasonable steps to ascertain the identity of the beneficial owners of the entity in question and has the power, by notice, to require the provision of such information from members.

Under the new proposals the new register will apply to all legal entities in Guernsey, including limited partnerships and foundations registered and established under the Limited Partnerships (Guernsey) Law, 1995 and the Foundations (Guernsey) Law, 2012 respectively, which will likely mean that they too will be required to appoint resident agents (if they do not already have them) for this purpose.

It is intended that the exemptions currently in place for entities which are already subject to beneficial ownership disclosure requirements (for example listed companies and open/closed-ended companies and investment schemes) will continue under the new regime.

Beneficial owners
To provide clarity it is intended that a statutory definition of 'beneficial ownership' will be introduced by the Committee by regulation.  Although it appears that the Committee intends to engage in a further period of consultation in respect of this definition it is likely that this will follow the FATF recommendations as regards ownership and control in order to comply with international standards.

Registrar's powers
It is proposed that a new office of Registrar of Beneficial Ownership will be established with powers to monitor and verify information provided by resident agents.  The Registrar's powers will include the ability to issue notices to obtain beneficial ownership information from legal entities, resident agents or third parties (with whom a beneficial owner has an established business relationship) but will be subject to strict safeguards as to confidentiality and data protection.  For example, it is proposed that the Registrar will only be empowered to take copies of documents at an entity's registered office where this is necessary for the purposes of an enforcement action.

To avoid duplication it is proposed that such powers will not extend, however, to legal entities already subject to oversight by the GFSC.  It is anticipated that the new legislation will extend the GFSC's existing enforcement powers to include the adequacy of information provided to the Registrar with concomitant information sharing powers between the two bodies to enable this to be policed adequately.

Access to information
The register will not be publically available as it is not considered that this would enable Guernsey to demonstrate that the information held is secure.  Accordingly all information provided to the register would be confidential and electronic data held encrypted.  It is proposed, however, that such information can be shared with Guernsey's revenue and law enforcement bodies as well as with foreign authorities for certain specified purposes subject to adequate legal gateways being put in place.

The proposal is for such specified purposes and legal gateways to mirror those already in place elsewhere in Guernsey law - namely the prevention, investigation or prosecution of crime, the exercise of regulatory functions and the exercise of the functions of intelligence, tax and local and international regulatory and sanctions authorities.

Resident agents
It is proposed that resident agents be under a statutory duty to keep an up-to-date record of the relevant beneficial owners' particulars. To assist, their existing information gathering obligations under the Companies Law and the LLP Law will be extended to require notification of any former names of an individual along with an address for service for that individual.  Additionally they will be under explicit obligations to verify that such details are correct and provide them to the Registrar with a statement confirming that such verification has taken place. In the case of nominee arrangements both the legal and beneficial owners of entities will need to be notified to the Registrar. Such obligations will be ongoing with resident agents being required to notify the Registrar of any changes as soon as they could reasonably be expected to have become aware of them.

Given the introduction of wider obligations for resident agents, it is proposed that their existing information gathering powers in relation to members under the Companies Law and the LLP Law will be extended to enable them to obtain information from third parties who may hold relevant information about a beneficial owner.  Such powers will likely correspond to the information gathering powers recently introduced in the UK in respect of the register there and include a statutory duty that resident agents exercise them where they have "reasonable grounds" for believing that a person may be a beneficial owner.

In order to afford resident agents some measure of protection in the case of non-compliant entities it is also proposed that a statutory mechanism be put in place to allow them to serve notice of an intention to resign, the effect of which would be to leave an entity liable for strike off absent the appointment of a replacement.

In order to afford resident agents some measure of protection in the case of non-compliant entities it is also proposed that a statutory mechanism be put in place to allow them to serve notice of an intention to resign, the effect of which would be to leave an entity liable for strike off absent the appointment of a replacement.

Enforcement/penalties
In order to comply with international standards it is proposed that the Registrar will have powers to issue warnings, private and public statements and compliance notices (for example requiring provision of up-to-date or further information) as well as to impose administrative financial penalties and disqualify persons from acting as resident agents.  

Where the Registrar has reasonable grounds to believe that a member or beneficial owner has failed to comply with his obligations it is proposed that he be empowered to place such restrictions on that member's interest as he thinks fit, including on voting, transfer and dividend rights.  Additionally it is proposed that, along with civil penalties up to a maximum of £20,000, criminal penalties and sentences of imprisonment (up to a maximum of 2 years) will apply for serious breaches of obligations in relation to beneficial ownership information, similar to those already in place under existing Guernsey legislation for comparable offences.

Again it is not proposed that such powers will extend to entities licensed or administered by persons licensed by the GFSC since the GFSC already has extensive supervisory jurisdiction in this regard.  As above, information sharing powers will be provided to the Registrar and the GFSC in order to ensure that such entities are fulfilling their obligations going forward.

Bearer instruments
Although the issuing of bearer shares has not been permitted in Guernsey for many years now, there are no implicit or explicit prohibitions in respect of the use of bearer warrants.  Accordingly, in order to ensure compliance with current FATF standards it is proposed that the new legislation extend the prohibition to cover all bearer instruments.

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