Ultimate Beneficial Ownership

March 7, 2025
Posted by: Altus Regional Team
Categories: Corporate & Compliance, General

Identification of the Ultimate Beneficial Owner (UBO) is a cornerstone of global and regional efforts to enhance corporate transparency and combat financial crimes such as money laundering and terrorist financing. Understanding the ultimate beneficial owner of a company is particularly critical, as ownership may be dispersed across multiple investors, nominee arrangements, or other corporate entities. For reporting entities in the Caribbean, understanding the concept of UBOs, the methods of identification, and the associated compliance obligations is essential.

Who is the Ultimate Beneficial Owner of a Public Company?

In public companies, where ownership is often dispersed among numerous shareholders, identifying a single UBO can be challenging. Institutional investors and nominee arrangements may further obscure the true ownership structure. The Ultimate Beneficial Owner (UBO) of a public company is the individual or individuals who ultimately own or control the company, either directly or indirectly, despite the company being publicly traded and its shares being widely held.

The requirement for public companies to maintain Ultimate Beneficial Owner (UBO) information varies by jurisdiction. In many regions, public companies are subject to transparency regulations that mandate the identification and disclosure of UBOs to combat financial crimes like money laundering and tax evasion. However, some jurisdictions provide exemptions for publicly listed companies, as their ownership information is often already transparent due to stock exchange disclosure requirements.

For example, in the European Union, the 4th and 5th Anti-Money Laundering Directives require companies to register UBOs, but listed companies are generally exempt because their ownership is publicly accessible through regulated markets. In the Caribbean, specific requirements depend on the country. For instance, companies listed on regional stock exchanges like the Eastern Caribbean Securities Exchange (ECSE) may have different obligations compared to private entities.

How to Identify the UBO of a Private Company

The Financial Action Task Force (FATF) defines an ultimate beneficial owner as the natural person(s) who ultimately owns or controls a legal entity. This includes individuals who hold a significant ownership interest (commonly 25% or more), exercise control through voting rights, or influence the company’s management and policies. Some jurisdictions may lower this percentage. Identifying the UBO of a company requires a systematic approach, which involves several steps:-

1. Refer to Domestic Legislation and Guidelines– Thresholds for beneficial ownership varies across jurisdictions. Accordingly, the first step in identifying the UBO is consulting the legislation and any guidelines issued by the relevant authority on beneficial ownership. E.g., In the Eastern Caribbean, the Eastern Caribbean Securities Regulatory Commission (ECSRC) provides guidelines for identifying significant shareholders and UBOs.

2. Examine Share Registers– Review the company’s share register to identify individuals or entities holding significant shares or voting rights. Share registers are often maintained by the company or a central securities registry.

3. Analyze Voting Rights Structures– Investigate the company’s share classes and voting rights to determine who holds significant influence. This includes identifying shares with enhanced voting power. For example, a company might issue dual-class shares, where one class grants 10 votes per share, enabling a shareholder with fewer shares to control a larger proportion of votes.

4. Trace Indirect Ownership and Control– Follow ownership through intermediary entities, such as holding companies or trusts, to uncover the individuals who ultimately control the shares or voting rights. Example: A company might be 40% owned by a holding company. Investigating the holding company’s ownership could reveal the UBO.

5. Evaluate Shareholder Agreements and Proxies– Identify any agreements or proxies that consolidate voting power in the hands of an ultimate beneficial owner. E.g., a shareholder holding 20% of shares might have proxies for an additional 20%, effectively controlling 40% of votes.

6. Conduct Due Diligence on Shareholders– Verify the identities of potential UBOs and their relationships with the company through due diligence processes. For example, a major shareholder might be acting on behalf of a trust. Investigating the trust’s beneficiaries could identify the UBO.

Importance of Identifying the UBO: The Caribbean Context

The identification of UBOs is critical for several reasons. From a compliance standpoint, it is a cornerstone of anti-money laundering (AML) measures, enabling organizations to detect and mitigate risks associated with concealed ownership or financial crimes. Transparency regarding beneficial ownership reinforces corporate governance, safeguards against conflicts of interest, and enhances trust among stakeholders. Failure to identify and disclose UBOs can result in significant legal and financial penalties, as well as reputational damage. For instance, under Trinidad and Tobago legislation, such as the Proceeds of Crime Act (PoCA), entities that fail to comply with AML obligations, including UBO identification, may face severe sanctions.

Under AML regulations across the Caribbean, reporting entities are required to implement robust Know Your Customer (KYC) procedures. This includes verifying the identity of UBOs, maintaining accurate records, and conducting ongoing monitoring to detect changes in ownership or control. Enhanced due diligence is necessary for high-risk UBOs, such as politically exposed persons (PEPs).

The FATF Guidance on Beneficial Ownership of Legal Persons emphasizes a multi-pronged approach to beneficial ownership transparency, combining information from companies, public authorities, and other sources to ensure rapid and efficient access to data.

In the Caribbean, legislation such as the Companies Act of Barbados (Cap. 308), the Companies Act of Jamaica (2004), and the Belize Companies Act 2022 provides frameworks for identifying and maintaining records of beneficial ownership. For example, Section 15A of the Barbados Companies Act requires companies to file annual returns, notifying the Registrar of Corporate Affairs that beneficial ownership information is maintained and up-to-date. Similarly, the Belize Companies (Amendment) Act 2023 mandates that UBO information be filed with the Companies Registry via the Online Business Registry System (OBRS), ensuring secure storage and access by competent authorities. The OBRS system ensures that beneficial ownership data is securely stored and updated within a stipulated timeframe of any changes.

In Antigua and Barbuda, guidelines issued by the Office of National Drug and Money Laundering Control Policy underscore the importance of maintaining beneficial ownership records and reporting suspicious activities to the Financial Intelligence Unit (FIU).

The Companies Ordinance and Beneficial Ownership Regulations of Turks and Caicos require companies to disclose beneficial ownership information to designated authorities for purposes such as crime prevention and national security. The Companies Ordinance and the Beneficial Ownership Regulations 2017 establish requirements for maintaining a register of beneficial owners. These regulations ensure that beneficial ownership information is accessible to designated authorities, such as the Financial Intelligence Agency and the Anti-Money Laundering Committee.

The Corporate Affairs and Intellectual Property Office (CAIPO) in Barbados has issued guidelines on beneficial ownership under Section 448A of the Companies Act, emphasizing the importance of maintaining accurate and accessible beneficial ownership information.

The Role of Legal Professionals in Promoting Transparency

Legal professionals occupy a central role in ensuring corporate transparency, particularly when advising on the identification and disclosure of UBOs. Their expertise underpins the integrity of corporate governance and compliance with international standards, such as the Financial Action Task Force (FATF) Recommendations, and regional legislative frameworks like the Barbados Companies Act, Belize Companies Act, and Turks and Caicos Beneficial Ownership Regulations. By diligently investigating ownership structures, maintaining accurate records, and ensuring adherence to Know Your Customer (KYC) and Anti-Money Laundering (AML) obligations, legal practitioners protect their clients from legal and reputational risks while fostering public trust. Moreover, their actions contribute to broader regulatory goals, deterring financial crimes and reinforcing the accountability of corporate entities. In fulfilling these responsibilities, legal professionals not only uphold compliance but also act as stewards of a more transparent and equitable global financial system. Their role is, therefore, not merely technical, but profoundly impactful in shaping the ethical and operational frameworks of the corporate world. By adhering to guidance from the FATF, applicable legislation, and regulatory bodies, lawyers can navigate compliance challenges effectively and contribute to a more transparent corporate environment.