A company can have many beneficial owners. Tracing a beneficial owner of a company can be an uphill struggle. This is why various laws have been introduced recently that tell the companies how to deal with them. To know about the new laws and regulations, we first need to know who a beneficial owner in a company is. So, if you also want to find out about beneficial owners and the new regulations related to them, stay tuned!
Who Is A Beneficial Owner In A Company?
A beneficial owner in a company is a person or entity that directly or indirectly owns or controls 25% or more shares in the company. In case the shares are acquired through a broker, the person for whom the shares are bought will be known as the beneficial owner of the company.
According to securities law, a beneficial owner can either enjoy solo or shared voting power in the stock of a company. It all depends upon whether they control the shares directly or indirectly.
Why Do Investors Prefer Being A Beneficial Owner?
For a lot of investors who do not want to hold the responsibility of voting and getting involved in corporate decisions, being the beneficial owners of the company is the most convenient option for them. In this way, someone else plays a role in decision making while the investors can enjoy the share in profit gained by the company.
What Are The Risks Involved?
Apart from not having to take part in the decision making of the company, a lot of prefer being beneficial owners because they do not want to be identified as the shareholders. Many investors try to hide their identity on purpose to evade taxation and to avoid other corporate crimes such as corruption, bribery, and money laundering. This is why the Financial Action task Force (FATF) has introduced many laws and reforms to handle this grave situation.
What Is The Beneficial Ownership Reporting Law?
The FATF is an international body which introduces rules and reforms to prevent money laundering and terrorist financing. This is why it has introduced many reforms and guidance for the Financial Institutions of various countries to maintain transparency and implement a risk-based approach in handling the beneficial owners of the company. The FATF recommends multinational to keep a record of the beneficial owners of themselves and their subsidiaries and report and disclose them in their financial statements to maintain transparency for the avoidance of crimes.
How Should Multinational Companies Handle Their Beneficial Owners?
Multinational companies have the obligation of reporting beneficial owners of themselves and many of their subsidiaries. Keeping a track of the beneficial owners of all their subsidiaries can be a rather time taking and long process. This is why the companies should outsource this task to other companies that do the job. Companies for whom global entity management is their core business. In this way, they can save their time and focus on their core business.
Although a lot of investors opt for being the beneficial owners because they do not want to get involved in the decision-making process of the companies and only have a share in the profit, a lot of people are using it to commit corporate crimes as well. This is why FATF has made it obligatory for the companies to report the beneficial owners in their financial statements.