The Beneficial Ownership of Legal Persons (Guernsey) Law, 2017 (the "Law") came into force on 15 August 2017. The Law must be read in conjunction with the Beneficial Ownership (Definition) Regulations, 2017 (the "Regulations") to clarify the meaning of beneficial owner for the purposes of the Law. In broad terms the Regulations impose a 25% ownership threshold before a person is to become a beneficial owner of a relevant legal entity.
Test for beneficial ownership
The Law imposes a statutory duty on resident agents to keep an up-to-date record of the beneficial owners of legal persons for which they are responsible. The Regulations propose a three stage test to enable such owners to be identified and a beneficial owner is defined as the natural person who:
- ultimately controls a legal person through ownership; or
- ultimately controls a legal person through other means; or
- holds the position of a senior managing official of the relevant legal person.
Ownership threshold - Company, LLP or Foundation
A person or entity will be deemed to control a company or LLP if:
- they hold, directly or indirectly, more than 25% of the total shareholding or voting rights; or
- they hold the right to remove a majority of the board of directors (whether they meet the 25% threshold or not).
Individuals who own shares or rights jointly each will be treated as holding that share or right.
A person or entity will be deemed to control a foundation if:
- they hold, directly or indirectly, more than 25% of the voting rights or the right to remove a majority of the foundation officials;
- they are a beneficiary with a vested interest;
- they are any other person who benefits from a foundation; or
- they are the default recipient of a foundation's assets upon termination.
Where a relevant legal person is controlled by a fixed trust (i.e. not a discretionary trust) the Resident Agent is required to look through the arrangement and identify any beneficiaries of the fixed trust. Such beneficiaries will be deemed to be the beneficial owners of the underlying entity.
For discretionary trusts the position is less straightforward:
- Any natural person trustee will qualify as will any Guernsey corporate trustee and any director (or equivalent) thereof.
- Resident agents will be required to look through non-Guernsey corporate trustees and identify any natural persons who would be the beneficial owners of that trustee. In addition they will also need to identify the non-Guernsey trustee and its directors (or equivalent).
- Any person who has the power to appoint or remove trustees; amend or revoke a trust deed; or the power to direct the investment decisions of or the distribution of funds from a trust will also qualify as a beneficial owner of the underlying entity.
Implementation & Guidance
All Guernsey companies, LLPs and foundations registered from 15 August will be required to provide their beneficial ownership information at the time of incorporation.
The timeline for populating the beneficial ownership register for all companies formed prior to 15 August 2017 remains 28 February 2018 and resident agents are expected to be able to make beneficial ownership submissions from 15 August 2017 onwards. Guidance from the Guernsey Registry as to how to populate the Register can be found here, including template records and guidance on filing submissions online.
Further details as to the requirements under the Law can be found in our February 2017 Briefing.
For further information contact Alasdair Davidson.
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