Defining and capturing information on the beneficial ownership of listed companies

Policy considerations

An analysis of the various approaches from different jurisdictions above, established principles of effective BOT reforms, and an exploration of what core information should and can realistically be collected and published about PLCs give rise to a number of policy considerations and potential solutions, detailed below. [93]

Defining what information to collect from listed companies

Information about who owns, controls, and benefits from PLCs should strike the balance between being feasible and practicable to disclose for PLCs, whilst also being sufficient for the users of the information to achieve their respective purposes. A jurisdiction’s policy aims may inform the range of uses for this information, as well as which information is made accessible to which users and in what format.

BOT as a policy area has historically focused on private limited liability companies. Increasingly, countries are looking to include additional corporate vehicle types into the scope of disclosure. Whilst substantively the concept of BO remains the same – the natural persons who ultimately own, control, or benefit from corporate vehicles – legal definitions have developed for unlisted limited liability companies. These definitions are not necessarily suited to apply the substantive notion of BO to other corporate vehicles. For example, where BO is highly distributed for PLCs, smaller proportions of ownership may amount to a controlling interest.

As BOT is being applied to an increasing number of corporate vehicles, there is a need to constantly reassess what BO means as a substantive concept when applied to other entities and arrangements, such as trusts, state-owned enterprises, investment funds, and PLCs. [94] Consequently, jurisdictions may be best served by including a single, unified, broad definition of BO in primary legislation, which should not be prescriptive to a level of detail that limits what this means when applying the substantive concept of BO to different corporate vehicles.

The comparison of various national frameworks suggest that applying the concept of BI may lead to more useful and usable information than applying the concept of BO, despite it being a less exhaustive concept. This is perhaps unsurprising, as the categories of beneficial owners that are practically feasible to identify for PLCs and likely to exist, given their highly distributed and dynamic ownership, are ones that are already captured by the concept of BI, including direct interests and interests held through nominees.

Looking at the examples of Albania and the UK above (Box 8), it appears that subjecting PLCs to BO disclosure does not necessarily lead to more useful information about ownership and control. Where this requirement is created on the basis that a PLC is not subject to adequate disclosure and transparency requirements through a given stock exchange, it is reasonable to assume that this may create a counterproductive situation in which there is less useful information available about PLCs deemed to be higher risk. In comparison, there seems to be more useful information available about ownership and control as a result of subjecting all PLCs to BI disclosure. It may also provide an opportunity to subject all PLCs at the minimum to the same disclosure requirements, and to remove potential loopholes due to exemptions.

Nevertheless, more research should be conducted with prospective data users to see whether BI disclosure is sufficient to use the information to meet various policy aims. This should include a range of users, both inside and outside government, and a range of policy areas, including AML, tax, and corporate governance. South Africa will be a useful test case to follow in this regard. For example, for competent authorities with investigative powers, BI information alone may be adequate to help identify beneficial owners in their investigations, even where BI is held by a corporate vehicle. As BI holders can be either natural persons or corporate vehicles, the jurisdiction of incorporation of these corporate vehicles, including whether they are subject to BO disclosure, should be a consideration, as illustrated by the South Africa example. Governments should assess whether the information is also sufficient for other users without investigative capacities, both inside and outside government. The same approach could be taken with respect to thresholds, whether for BO or BI information, and iteratively reviewed on the basis of the usability of the information collected – effectively, to what extent they can be used to manage and mitigate certain risks – and balanced against compliance feasibility. The South Africa example suggests that PLCs should be able to report this information regularly in short time periods.

If BI information is sufficient to meet policy aims, the main challenge becomes addressing the current deficiencies in the information ecosystem. A standardised, international definition of BI as well as structured data could enable the integration and exchange of information, whilst also lowering compliance burdens. Structured data refers to information that is highly organised according to a predefined model. Because the structure is predefined, users know what to expect from the data, and this makes it easy to work with. [95]

Jurisdictions should assess whether definitions of BO and BI are already included in their legislation and are sufficient, and ensure a clear distinction is made between the definitions of BI and BO. Both definitions should consider certain rights and powers held through other means, such as derivatives. If policymakers decide BI information may be sufficient to collect from PLCs, where the BI holder is a natural person, the same information should be collected as under the BO disclosure requirements, and should be sufficient to identify the individual. Where the BI holder is a corporate vehicle, reliable identifiers should be collected. Policymakers should consider placing obligations on these parties to disclose their status to the PLC in question, although how to ensure compliance by non-domestic parties requires further thought.

Storage of and access to centralised structured information

Evidence and experience with the implementation of BO registers for non-listed companies make clear that effective implementation and use of the information requires it to be centralised. Where information about the ownership and control of various corporate vehicles is held by different authorities, the information should be combined and ideally searchable through a single portal. At the very least, it should be clear and intuitive where information is held if it is not held in a single location, including for those not familiar with the jurisdiction. Moreover, the use of a data standard helps ensure that BO data is of high quality and is interoperable.

Practically, this means it should not matter whether relevant information for PLCs is held by a central BO register or a regulator, provided the information is integrated. If PLCs are included within the central BO register, there should be direct links to any relevant information held by the regulator. Information should not just be published directly by PLCs themselves, and it ideally should not just be held by the stock exchanges, particularly where there are multiple stock exchanges in a jurisdiction. There are significant practical challenges to users accessing and using information about PLCs reported by exchanges, particularly where this relies on annual reporting. [96] If information is held by a stock exchange as structured data, such as in South Africa, governments might choose to explore whether this information could be centralised and integrated with other information by automatically ingesting it into the central register. Governments can also explore whether other intermediaries, such as CSDs, may hold relevant information that could be integrated to form comprehensive views of ownership structures.

Collating the information centrally and collecting reliable identifiers for corporate vehicles and individuals will allow combining the information with other centrally held BO information. [97] This will help with visualising full ownership chains, particularly where information on intermediaries is collected, and help with BO disclosure for non-listed corporate vehicles where PLCs appear in their ownership chains. Centralising the information will enable all users who have a role in advancing a jurisdiction’s policy aims to access relevant information so it can be effectively used, as well as enabling necessary safeguards around access to be put in place.

Deciding which listed companies should be subject to disclosure

On the basis of determining which information is required, and with the aim of centrally collecting this, governments can determine which PLCs should disclose what information to which party, and can exempt certain PLCs from full disclosure to certain parties on the basis that they are already doing so. [98] The overarching principle should be that relevant information – at the minimum BI information – is collected and centrally accessible. Exemptions should only be granted on the basis that this information exists somewhere and is readily available. Where disclosure and transparency standards are lower, for example, because of a less comprehensive definition, less timely disclosure, or lack of access or centralisation and poorly structured information, PLCs can be required to disclose relevant information to a central register. Based on the nature of and risk posed by certain exchanges, and the ownership and control structures of certain PLCs, requiring full BO disclosures may be more proportionate to meeting policy aims, as well as being feasible and necessary.

A key factor to consider is that not all PLCs list all their shares, or they may list on multiple exchanges with varying disclosure and transparency requirements, which is a potentially significant gap in current reporting regimes. Implementers should consider what disclosure requirements apply to the unlisted shares to determine whether a PLC which lists some of their shares can be exempt, or whether a minimum threshold of shares listed should apply in order to be exempt. For example, PLCs could be required to disclose the BO of their unlisted shares to a central BO register, or be exempt on the basis that the exchange requires disclosure about the unlisted shares.

Exemptions should only be given based on the jurisdiction of the exchanges, if the same conditions apply to all exchanges in that jurisdiction. The list of stock exchanges, either approved or excluded, should be publicly available and regularly reviewed, at least on an annual basis. Information about or assessments of the adequacy of transparency requirements among stock exchanges could be made public. The EU appears to be on track to go further and set exemptions not only based on the transparency and disclosure requirements of stock exchanges and regulators, but also on the ownership and control structures of the PLCs themselves. [99] How this will be implemented and play out in practice will undoubtedly inform the thinking on the BO disclosure of PLCs, and highlights the need for better information on corporate structures, through BO disclosures, information held by intermediaries, or otherwise. Regardless, the dematerialisation of shares will allow for better monitoring, oversight, and enforcement of disclosure requirements and exemptions.

There is a role for international standard setters and multilaterals to play in assessing the adequacy of transparency and reporting requirements to stock exchanges in order to assist governments in assuring their BOT regimes are providing sufficient coverage of PLCs. These assessments could be a valuable asset for implementing governments and data users. Governments should also consider how they legislate for exemptions. For example, each stock exchange that qualifies for exemption should be listed in secondary legislation or regulations. [100]

Collecting information from exempt listed companies

PLCs should not be wholly excluded from disclosure requirements to a central register, as they should be at the minimum required to disclose sufficient information in order to understand why they have been exempt, and for relevant data users to readily access relevant information where it is held, particularly if this is outside the jurisdiction in question. [101] This means that PLCs should be identifiable based on the published BO data, and sufficient data should be collected to connect them to relevant stock exchange listings. [102] For auditability, it should be possible to connect a PLC to existing relevant filings of information about its ownership, for instance, on a stock exchange, using information available from the BO declaration or a related entry in a register (see Box 9).

Like non-listed companies, PLCs should be subject to confirming their information on a regular (at least annual) basis, including on what basis they qualify for an exemption, if any. Certain changes in their listing of shares should trigger a requirement to update information. In order to ensure the adequacy and accuracy of the information reported by exempt PLCs, it is also important to ensure that the agencies responsible have the capacity to check and, if necessary, reject claims for exemptions based on their listings in the reported stock exchanges.

Footnotes

[93] Open Ownership, Principles for effective beneficial ownership disclosure (s.l.: Open Ownership, 2023), https://www.openownership.org/en/principles/; Armstrong and Lord, Beneficial ownership transparency and listed companies, 8-9.

[94] See: Ramandeep Kaur Chhina, Beneficial ownership transparency of trusts (s.l.: Open Ownership, 2021), https://www.openownership.org/en/publications/beneficial-ownership-transparency-of-trusts/; Emma Howard and Stephen Abbott Pugh, Defining and capturing data on the ownership and control of state-owned enterprises (s.l.: Open Ownership, 2023), https://www.openownership.org/en/publications/defining-and-capturing-data-on-the-ownership-and-control-of-state-owned-enterprises/; and Chhina and Markle, Defining and capturing information on the beneficial ownership of investment funds.

[95] Jack Lord and Tymon Kiepe, Structured and interoperable beneficial ownership data (s.l.: Open Ownership, 2022), https://www.openownership.org/en/publications/structured-and-interoperable-beneficial-ownership-data/.

[96] OECD, Beneficial Ownership Disclosure in Asian Publicly Listed Companies, 21.

[97] Kadie Armstrong and Stephen Abbott Pugh, Using reliable identifiers for corporate vehicles in beneficial ownership data (s.l.: EITI and Open Ownership, 2023), https://www.openownership.org/en/publications/using-reliable-identifiers-for-corporate-vehicles-in-beneficial-ownership-data/.

[98] To understand how this works in practice, please refer to: Armstrong and Lord, Beneficial ownership transparency and listed companies.

[99] General Secretariat of the Council of the European Union, “Proposal for a Regulation of the European Union Parliament and of the Council on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing”, 257.

[100] See, for example, Schedule 4 of the Companies Act (2023 Revision), listing all approved stock exchanges: Cayman Islands, “Companies Act (2023 Revision) Companies (Amendment of Schedule 4) Order, 2023 (SL 16 of 2023)”, Supplement No. 1 published with Legislation Gazette No. 20, 19 July 2023, https://legislation.gov.ky/cms/images/LEGISLATION/AMENDING/2023/2023-A016/CompaniesAmendmentofSchedule4Order2023SL16of2023.pdf.

[101] Armstrong and Lord, Beneficial ownership transparency and listed companies.

[102] Armstrong and Lord, Beneficial ownership transparency and listed companies, 3.

[103] This list is, in part, based on: Armstrong and Lord, Beneficial ownership transparency and listed companies, 8-9; Markle, Coverage of corporate vehicles in beneficial ownership disclosure regimes, 23.

[104] “ISO 10383 – Market identifier codes”, ISO, 11 March 2024, https://www.iso20022.org/market-identifier-codes.

[105] ​ISO 10383​ MIC codes, ISO, 2024, https://www.iso20022.org/sites/default/files/ISO10383_MIC/ISO10383_MIC.pdf.

[106] “org-id.guide”, home page, n.d., http://org-id.guide/.

[107] “LEI search”, GLEIF, n.d., https://search.gleif.org/#/search/.

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