MBIE Consults on Beneficial Ownership of Corporate Bodies

, Emma Burke

The Ministry of Business Innovation and Employment (MBIE) has launched a public consultation on beneficial ownership of corporate bodies. MBIE is interested in potentially requiring New Zealand registered companies and limited partnerships to hold and disclose information about their beneficial owners. Submissions close on Friday 3 August and can be made on MBIE’s website here.

 

What is a “beneficial owner”?

Beneficial owners are the individuals who ultimately own, or exercise effective control over, a company or a limited partnership. For the purposes of MBIE’s consultation, the definition of a beneficial owner is:

Internationally, government authorities want to know who the beneficial owner of an entity is (as opposed to the legal owner). This can help authorities to detect criminal activity and uncover the proceeds of crime, which are often hidden behind complex ownership structures. MBIE also considers that transparent beneficial ownership information helps protect legitimate businesses and makes it easier for the public to identify who they are dealing with.

 

Why is this necessary?

MBIE considers that the existing tools to identify beneficial owners are insufficient. Government authorities can spend a significant amount of time and effort in researching ownership and control structures. This can lead to concerns about New Zealand’s international reputation as a safe and transparent place for business.

While some information is gathered by reporting entities under Anti-Money Laundering legislation, there are still gaps. MBIE ideally wants government authorities to be able to conduct data analysis (and pattern recognition) on a centralised database of beneficial ownership information. But no such database currently exists.

 

What are MBIE’s proposed options?

MBIE has presented 3 options for beneficial ownership information, on a sliding scale of transparency:

  1. Corporate entities maintain their own records and disclose these to the Registrar of Companies when requested;
  2. Beneficial ownership information is disclosed to the Registrar and other government agencies, but is not publicly available; or
  3. Beneficial ownership information is included on publicly available registers, including the Companies Office website.

MBIE favours the third option as the most transparent, while noting it carries the greatest privacy concerns. The first option carries the risk of “tipping off” criminals when the Registrar requests the information (as is currently the case). The second option wouldn’t allow journalists and others to investigate suspicious behaviour.

 

What are the likely consequences?

Each option would increase compliance costs for all companies – but particularly for entities with a complex ownership structure. Making beneficial ownership information publicly available could also lead to privacy concerns for beneficial owners, especially for businesses engaged in sensitive industries. It’s important to have a trusted, transparent system for doing business in New Zealand, but this needs to be weighed against the possibly negative consequences.

 

What next?

If this proposal concerns you, you may like to make a submission to MBIE before the 3 August deadline. If you would like any help, please give us a call.