Ownership registers: what they show, and what they leave out

An ownership register looks like an answer. It gives a name, a nationality, a percentage and a date. For many enquiries that entry is the first document anyone sees, and it is tempting to treat it as the last. The difficulty is that a register shows what someone chose to file, in the form the law required, at a particular moment. What it leaves out is often the part that matters to the reader.

Legal owners and beneficial owners

Most company registries record legal ownership, meaning the person or entity in whose name the shares are held. That may be an individual, but it is often another company, a trust or a nominee. Beneficial ownership registers try to go further and identify the natural persons who ultimately own or control the company. The two can be very different. The legal owner may be a holding company in another jurisdiction, while the beneficial owner sits several layers above it.

In many jurisdictions the beneficial ownership entry is a self-declaration. The company, or someone acting for it, states who its beneficial owners are, and the registry accepts the filing. Some registries have begun to introduce identity verification for directors, beneficial owners or the people who file, but older entries were made before those checks existed. Verifying a person's identity is also a different exercise from verifying the ownership declared. A register can confirm that a statement was made. It rarely confirms that the statement is true.

A register records what someone chose to declare, and that is where the work begins.

Where the gaps tend to be

Thresholds are the first gap. Many regimes require disclosure of individuals who hold more than 25 per cent of the shares or voting rights (25 per cent or more in some regimes), or who exercise control by other means. Someone with a smaller stake may not appear at all. Several family members or associates, each holding just below the threshold, can together hold a controlling interest without any of them being named. Some regimes treat holdings under a joint arrangement as one, and many include a test of control by other means, but both depend on the company recognising the position and declaring it.

Nominees are the second. A nominee shareholder or director holds a position on behalf of someone else, which is lawful in many places. The register shows the nominee. Some regimes now require nominees to declare their status and the person they act for, but where that rule is absent or ignored, the arrangement behind the nominee remains a private matter that no registry sees.

Trusts and foundations are the third. Depending on the jurisdiction, a register may list a trustee, a settlor, a protector, the beneficiaries or none of them. Discretionary arrangements make it hard to say who benefits at any given time.

Layered structures are the fourth. A company in one country may be owned by a company in a second, which is owned by a partnership in a third. Each registry sees only its own layer, and some layers sit in jurisdictions that publish little or nothing.

Access has changed

In November 2022 the Court of Justice of the European Union ruled that the provision of EU anti-money laundering law giving the general public access to beneficial ownership information was invalid, on grounds of privacy and data protection. Several member states restricted or suspended public access to their registers in response. Later EU legislation provides for access by those who can show a legitimate interest. Implementation has been uneven, and what counts as a legitimate interest, and how it must be shown, differs between countries. Access rules should be checked at the time of each piece of research, and any conditions attached to access must be respected.

Using registers well

A register entry is most useful as a lead. The practical task is to find other records that can test it.

• Company filings. Annual returns, share allotments, confirmation statements and accounts can show shareholdings, transfers and related parties that differ from the beneficial ownership entry.
• Historical versions. Earlier entries, and the dates on which they changed, often say more than the current one, and a change shortly before a transaction or a regulatory event deserves attention.
• Court records. Litigation, insolvency and matrimonial proceedings can produce evidence of who actually funded, directed or benefited from a company.
• Other jurisdictions. Each layer of a structure should be followed into its own registry, with a note of where the trail stops and why.

Whatever the register says, record exactly what it says and when it said it. Note the date of access, the date of the filing and the date of any change. Registers are amended and records are removed, and a later reader needs to know which version a finding rests on. Where the information concerns private individuals, data protection rules govern how it is collected, stored and reported.

We treat every register entry as a claim made by a filer, and we test it before relying on it. Our reports state which register was consulted, on what date, and how far the entry was corroborated. Where a structure cannot be traced to a natural person, we say so plainly and explain where the trail stopped. A gap stated clearly is more useful to a decision-maker than an answer that only looks complete.