The Evolution of Beneficial Ownership Disclosure

by Mary J. Mahabir, Q.C, and Joanna M. Austin

In recent years global demands for corporate transparency have increased. In 2014 the Financial Action Task Force issued beneficial ownership directives and in 2017 the European Union issued the 4th Anti-Money Laundering Directive (the “4th Directive”) outlining various anti-money laundering (AML) and anti-terrorism measures, requiring member states to maintain beneficial ownership¹(“BO”) information. Member states implemented various requirements, either: central filing of BO details with public access, or with access restricted to authorities and persons with legitimate interests, or simply requiring companies to maintain BO registers.

Historically, Barbados like many other countries had no requirement to file shareholder details with the Registrar of Companies (the “Registrar”). There is still no requirement for companies to publicly disclose shareholding information. However, shareholding and beneficial ownership information must be disclosed to the International Business Unit and the Financial Services Commission for licensing purposes.

To enhance local transparency and comply with the 4th Directive, the Companies Act Cap. 308 of the laws of Barbados (the “Act”) was amended in 2019 requiring companies to retain up to date records of shareholder and beneficial ownership².

The Act was subsequently amended in December 2020 introducing sections 175 (5) to (14). The Registrar may now require companies to produce (a) any books, records, or other documents to be kept by a company under the Act and; (b) such other information as the Registrar requires for the proper administration and enforcement of the Act. The Registrar may also examine or appoint a person to examine, any books, records or documents which a company is required to keep under the Act, at a company’s expense. Effectively, the Registrar can request sight of beneficial ownership.

Additionally, the Registrar may give directions to a company for compliance purposes. Failure to comply with the Registrar’s disclosure requests or any direction under section 175(10), without reasonable cause, results in penalties ranging from $5,000.00 accruing at the rate of $500.00 for each day of non-compliance to $100,000.00 for continued non-compliance or 5 years imprisonment.

In February 2021 the Registrar directed all corporate entities to complete an online questionnaire including questions on maintenance of beneficial ownership information. Companies must inter alia disclose whether: (a) beneficial ownership information is maintained, is accurate and up to date, (b) reasonable steps have been taken, to identify, obtain and verify the beneficial ownership information; (c) beneficial ownership information is recorded in the share register.

The EU has issued a 5th AML Directive requiring public disclosure of BO information with a review to be held in January 2022. There is currently no global public BO disclosure requirement but a few offshore jurisdictions such as Bermuda in 2020 have announced intentions to make BO information public.

There have been no official reports on whether Barbados will require public disclosure of BO. However, the legislative amendments, the Registrar’s recent directives and the increased disclosure requirements by the International Business Unit and the Financial Services Commission, demonstrate Barbados’ commitment to increased corporate transparency, ensuring the requirements meet overall objectives while maintaining Barbados’ reputation as a preferred domicile for legitimate business structures.

¹ Article 3(6) of the 4th Directive defines a beneficial owner as any natural person(s) who ultimately owns or controls the customer and/or natural person(s) on whose behalf a transaction or activity is being conducted.

² Section 448 (e.1) of the Act “beneficial ownership” means the ultimate ownership or control exercised by a beneficial owner over a body corporate in circumstances where ownership or control is exercised through a chain of ownership or by means of control, other than direct control.

This article, current at the date above and as first published in the Barbados International Finance and Business Magazine 2021, is for general purposes only. It does not constitute legal advice and should not be relied upon as such. You should not act upon any information contained herein without first seeking qualified legal advice on your specific matter.

For more information, please contact Mary J. Mahabir, Q.C, at mary.mahabir@bb.lexcaribbean.com and Joanna M. Austin, Senior Associate at joanna.austin@bb.lexcaribbean.com or your usual Lex Caribbean contact.