Defining and capturing information on the beneficial ownership of listed companies

Overview

Publicly listed companies (PLCs, or listed companies) are companies that offer some or all their shares of stock to the general public to trade on securities markets through a stock exchange. [1] They play a significant role in the global economy, and many of the world’s largest and most valuable companies are PLCs. A PLC’s ownership is often distributed among general public shareholders through the free trade of shares on stock exchanges or over the counter markets. [2]

It was estimated that at the end of 2017, there were approximately 41,000 listed companies in the world with a combined market value of nearly USD 84 trillion, which was roughly equivalent to the global GDP. [3] The total market capitalisation of listed companies increased between 2017 and 2022, reaching nearly USD 98.5 trillion in 2022, with the world’s top 50 PLCs holding over a quarter of the proportional market share of global GDP in 2020. [4]

In light of the role of PLCs in the global economy, it is important that securities markets function well. To protect existing and potential investors and foster confidence in the markets, PLCs are often made subject to strict transparency and disclosure requirements by jurisdictions where they are registered or listed. For instance, they are often required to file certain reports to their respective regulators on an annual, quarterly, or ongoing basis, such as audited financial statements, management reports, responsibility statements, and beneficial interest (BI) reporting.

Since the mid-2010s, many jurisdictions have been implementing beneficial ownership transparency (BOT) reforms through requiring the upfront disclosure by corporate vehicles of their beneficial ownership (BO) to a central government register. Many countries are doing so in order to comply with Recommendations 24 and 25 of the global anti-money laundering (AML) standard-setting body, the Financial Action Task Force (FATF). To ensure an effective BO disclosure system, and to ensure it can achieve the widest range of policy aims, disclosure requirements should comprehensively cover all relevant types of entities and arrangements. [5]

There are, however, significant practical challenges to applying BO disclosure requirements to PLCs, whose ownership is highly distributed and subject to rapid change. It is difficult for many PLCs to maintain a clear, real-time picture of their beneficial owners due to their numerous and geographically dispersed shareholders; the prevalence of intermediaries and nominees; and the high speed of trading in securities globally, which means that aggregate ownership by any one individual in a PLC may change in intervals of seconds. Many implementers lack knowledge and information on what disclosure requirements related to BO they should put in place for PLCs to provide relevant, useful, and usable information. Jurisdictions often exempt PLCs from their BO disclosure regimes on the basis that PLCs are already subject to transparency and accountability requirements.

Although the misuse of PLCs for money laundering (ML) and other financial crimes may appear to be limited and the risk is generally considered to be low, there are some documented cases of their misuse in ML, corruption, tax evasion, and especially fraud cases. In cases where jurisdictions have excluded certain types of corporate vehicles from disclosure requirements, this has displaced risk and led to them becoming more attractive for misuse. [6] Civil society organisations have therefore been proposing and advocating for means by which transparency about who owns, controls, and benefits from PLCs may be strengthened. [7] Further exploration is needed to establish whether, in addition to the existing transparency and disclosure requirements on PLCs, BO disclosure is an appropriate instrument to generate useful information for their oversight.

This briefing explores a number of relevant questions for policy makers and agencies with responsibilities for implementing BOT reforms. These include the extent to which the reporting requirements already placed on PLCs by regulators and stock exchanges ensure sufficient visibility of and access to information about who ultimately owns, controls, and benefits from them; whether these requirements are sufficiently standardised across jurisdictions and stock exchanges; and which details should be collected from both exempt and non-exempt PLCs to ensure relevant information is readily accessible, useful, and usable. This briefing aims to address this through an analysis of international and national policy and regulatory frameworks on the BOT of PLCs, systematically exploring these questions and providing considerations for policymakers. It also identifies gaps for further research. The aim is to help decision makers and those implementing or supporting BO disclosure reforms to think through various issues and approaches toward ensuring the BOT of PLCs.

The briefing concludes with the following policy considerations:

• Policymakers should consider what information should be collected from PLCs and how this should be defined. They should consider the practical realities of PLCs as well as the concepts of BO and BI, and it should balance compliance feasibility with an exploration of the extent to which the information is useful and can be used to achieve stated policy objectives. Requiring BI information may be sufficient to meet some policy aims, and it may serve as a useful definition of the minimum amount of information to collect from all PLCs, in combination with BO disclosure where necessary and feasible. Jurisdictions should assess whether definitions of BO and BI are already included in their legislation and ensure a clear distinction is made between the definitions of BO and BI.
• Collecting and collating information about who owns, controls, and benefits from PLCs centrally, including reliable identifiers for corporate vehicles and individuals, will enable combining the information with other centrally held BO information. This can 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. Standardising international definitions and data structures enables the integration and exchange of information, and lowers compliance burdens.
• The principle that relevant information is collected and is centrally accessible should be guiding to setting exemptions. They should only be granted on the basis that this information exists somewhere and is readily available. Other factors, like the feasibility of disclosure for a PLC, could also be a criterion. 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.
• PLCs should not be wholly excluded from disclosure requirements to a central register, and they should at the minimum be required to disclose sufficient information to identify them, understand why they have been exempt, and readily access relevant information.

An introduction to listed companies

A PLC is a company that has some or all of its equity traded publicly on a regulated market. Whilst other types of corporate vehicles, such as trusts and investment funds, may be listed publicly in some jurisdictions, companies are by far the most common type of corporate vehicle found on stock exchanges, and are thus the focus of the briefing. Listed corporate vehicles structured as trusts are often investment funds, which are covered in a separate briefing. [8] In turn, investment funds typically hold or are involved in majority shareholdings of PLCs. Therefore, BOT of PLCs and investment funds should be considered together.

Listed companies typically need to meet certain legal and regulatory requirements, which may vary from country to country. Some common criteria include the following:

• Minimum share capital: Many jurisdictions require a minimum amount of share capital to be issued and paid up. This ensures that the company has sufficient funds to meet its obligations.
• Public offering: A PLC must offer a portion of its shares to the public for purchase. This is usually done through an initial public offering, where shares are sold to investors on a stock exchange.
• Limited liability: Shareholders of a PLC have limited liability, meaning their personal assets are protected from the company’s debts. This encourages investment.
• Disclosure and reporting: PLCs are often subject to strict disclosure and reporting requirements depending on the stock exchange where their securities are publicly traded, as well as being subject to the regulations and oversight of financial regulators and supervisors. For instance, a PLC registered on the London Stock Exchange (LSE) is subject to the Financial Conduct Authority’s (FCA) regulations and requirements. Similarly, a PLC listed on the New York Stock Exchange (NYSE) is subject to United States (US) Securities and Exchange Commission (SEC) rules and regulations.

The specific rules and regulations applicable to PLCs vary depending not only on the jurisdiction but also the market in which a company is listed. For instance, in the United Kingdom (UK), the rules and regulations for companies listed on the Main Market of the LSE differ from the companies listed in the Alternative Investment Market (AIM) of the LSE, which are considered to be lower (see Box 8). [9] Similarly, the rules and regulations governing the issuance of certificated shares and uncertificated shares by PLCs may vary depending on the jurisdiction (see Box 1). [10] Many jurisdictions are moving away from certificated shares in recent years to promote greater transparency and efficiency in a process called dematerialisation. [11]

	Representation	Transfer process	Record keeping
Certificated shares	Certificated shares are physical, tangible paper documents that provide evidence of ownership.	When a shareholder wants to transfer or sell certificated shares, they must endorse and physically deliver the share certificate to the new owner.	The ownership and transfer of certificated shares involve maintaining a physical record of share certificates and their ownership.
Uncertificated shares	Ownership of uncertificated shares is recorded electronically in the company’s books or with a centralised depository.	Transfers of uncertificated shares are typically done through electronic entries in the company’s records or through a centralised electronic system, such as a depository.	Ownership and transfer records for uncertificated shares are maintained electronically, providing a more efficient and convenient method of managing share ownership.

In addition to financial regulators and supervisors, there are a number of other intermediaries that play an important role, with varying degrees of responsibility, in ensuring the effective and smooth functioning of the financial market. These include, for instance, stock exchanges, clearinghouses, brokers, and central securities depositories (CSDs) (see Box 2).

General legal and regulatory framework for listed companies

Transparency of PLCs’ activities is essential for fair and proper functioning of capital markets and to protect existing and potential investors. Investors need reliable and timely information about the business performance and assets of the companies in which they invest, including transparency in the ownership and control structures of PLCs.

Examples of transparency and reporting requirements in the European Union and the United States

In the European Union (EU), there are special reporting rules for companies with securities admitted to trading on regulated markets. Any companies issuing securities are required to make their activities transparent by regularly publishing information, including yearly and half-yearly financial reports; information on voting rights, including those held through derivatives; major changes in the holding of voting rights; and ad hoc inside information which could affect the price of securities. [14] Each EU country is also required to create a mechanism through which the public can access the information disclosed by listed companies, including information on BI (see Box 3), and to ensure “at least one officially appointed mechanism for the central storage of regulated information”. [15]

	Beneficial interest in shares	Beneficial ownership
Similarities	– Captures information about rights a party may have with respect to a corporate vehicle in various ways, for example through shareholding, agreements, relationships, or nominee arrangements – Goes beyond immediate legal ownership to understand multiple levels of actors benefitting from the corporate vehicle’s activities – Uses thresholds (percentage of securities) to determine disclosure	– Captures information about rights a party may have with respect to a corporate vehicle in various ways, for example through shareholding, agreements, relationships, or nominee arrangements – Goes beyond immediate legal ownership to understand multiple levels of actors benefitting from the corporate vehicle’s activities – Uses thresholds (percentage of securities) to determine disclosure
Differences	– Can be a natural person, a legal entity, or a legal arrangement – Focuses on power associated with or over the shares (i.e. economic benefit, voting power, and the power to dispose of shares) – Does not necessarily consider aggregate power through multiple interests	– Must be a natural person – Focuses on power over the corporate vehicle (ultimate ownership or control, including control not related to share ownership) – Requires looking at aggregate power through multiple interests

In some jurisdictions where PLCs are subject to the disclosure of BI – as it is defined in Box 3 – it is referred to as BO. In the US, disclosures to the SEC for PLCs are referred to as BO, even though what is being reported is closer to the definition of BI, and BO is separately defined for other corporate vehicles.

Similar to the EU requirements, in the US, companies that are listed on the major US stock exchanges must follow the SEC’s regulations. [16] Any company seeking to trade its securities publicly must disclose information through a two-part registration process that includes a prospectus and a document that contains, among others, the company’s strengths, weaknesses, opportunities, and a threat analysis. PLCs are also required to prepare and issue two disclosure-related annual reports, one for the SEC and another for the company shareholders. The reporting requirements are also clearly stated under sections 13(d) and 13(g) of the Securities Exchange Act 1934 and Regulations 13D-G (Box 4). [17] Any reports submitted to the SEC are required to be updated by the company. As previously mentioned, even though the term BO is used, the definition is similar to the concept of BI (see Box 4). [18]

However, it is important to distinguish between these two terms when analysing the disclosure requirements applied by regulators or stock exchanges to PLCs. BO disclosure requirements are broader than BI disclosure requirements. Nonetheless, BI disclosure requirements sometimes overlap with BO disclosure requirements. For example, ownership of more than 10% of shares would be captured in the BI disclosure requirements of many exchanges, which might also meet the definition of BO in the jurisdiction. BI information may be useful for competent authorities to understand the ownership and control of PLCs and to follow the lead to identify natural persons who are ultimately owning or controlling a PLC, even when the BO information has not been disclosed. Therefore, irrespective of the terms jurisdiction’s use, this briefing will use the terms BI and BO as defined in Box 3.

Common transparency requirements across countries

Although transparency and disclosure regulations for PLCs may vary from country to country, common requirements include the following:

• Financial reporting: PLCs are typically required to prepare and publish audited financial statements on a regular basis, usually annually. These financial reports often must conform to certain standards, such as the Generally Accepted Accounting Principles or the International Financial Reporting Standards.
• Annual reports: In addition to financial statements, PLCs often publish comprehensive annual reports that provide a detailed overview of their business, operations, financial performance, and future prospects. These reports are made available to shareholders and the public.
• Disclosure of material information: PLCs must promptly disclose any material information that could affect the value of their shares. This includes information about financial results, significant events – such as mergers, acquisitions, or lawsuits – and changes in leadership.
• Shareholder meetings: PLCs are required to hold annual general meetings where shareholders can vote on important matters, including the election of directors and approval of financial statements.
• Corporate governance: Many countries and international organisations provide guidelines and codes of corporate governance for PLCs. These often include recommendations for board composition, the role of independent directors, and executive compensation.

The transparency and disclosure requirements applicable to PLCs in many countries also extend to the disclosure of certain minimum information about ownership and control to a regulator, such as the Securities and Exchange Commission (Box 5). The required information on ownership and control is usually collected when the company has its initial public offering and is generally verified by the responsible financial institutions and other obliged entities that provide services to the company. This may be referred to as BI or BO information, even though these differ substantively (see Boxes 3 and 4 above). It may be stored at the stock exchange at the time of the offering and be generally accessible on its website. Whether and how frequently ownership and control information will be updated depends on the policy and rules of each stock exchange.

However, from a BOT policy perspective, it is important to note that a common approach taken by regulators is to place BI or BO disclosure requirements only on the shares that are listed and traded on the stock exchange. The unlisted shares in a PLC which are not traded on the stock exchange may be subject to less stringent disclosure requirements. For example, in the US, reporting requirements for shareholders who acquire more than 5% of shares are not applicable for unlisted shares, although they are required to file other information with the SEC, such as annual reports and periodic reports. This discrepancy may create information gaps in some cases that prevent data users from having a complete understanding of who owns, controls, and benefits from a PLC.

Footnotes

[1] Listed companies are also known as publicly traded companies or publicly held companies. In some jurisdictions, shares in companies can be publicly traded without being listed. In the UK and other jurisdictions, PLC can refer to a public limited company, which does not imply they are listed. Other types of corporate vehicles can also be listed (for example, a unit trust). Although these are not within the scope of this briefing, the recommendations may still be relevant.

[2] Caroline Banton, “Publicly Traded Company: Definition, How It Works, and Examples”, Investopedia, 26 September 2023, https://www.investopedia.com/terms/p/publiccompany.asp.

[3] A. De La Cruz, A. Medina, and Y. Tang, Owners of the World’s Listed Companies (Paris: OECD, 2019), OECD Capital Market Series, 5, https://www.oecd.org/corporate/owners-of-the-worlds-listed-companies.htm. (Whilst emphasising the importance of understanding the ownership of PLCs to fully comprehend their economic and strategic decision-making, the OECD report identifies that four main categories of investors dominate the ownership of PLCs, including: institutional investors (41%); public sector owners (14%); and private corporations and strategic individual investors, with a combined ownership of 18%.)

[4] See: “Total market capitalizations of domestic companies listed on stock exchanges worldwide from 2013 to July 2023”, Statista, August 2023, https://www.statista.com/statistics/274490/global-value-of-share-holdings-since-2000/; Omri Wallach, “Top 50 Companies Proportion of World GDP”, Visual Capitalist, 19 July 2021, https://www.visualcapitalist.com/top-50-companies-proportion-of-world-gdp/.

[5] Open Ownership, Open Ownership Principles – Coverage (s.l.: Open Ownership, 2023), https://www.openownership.org/en/principles/coverage/.

[6] Alanna Markle, Coverage of corporate vehicles in beneficial ownership disclosure regimes (s.l.: Open Ownership, 2023), 8-9, https://www.openownership.org/en/publications/coverage-of-corporate-vehicles-in-beneficial-ownership-disclosure-regimes/.

[7] See: Andres Knobel, Beneficial ownership in the investment industry: A strategy to roll back anonymous capital (s.l.: Tax Justice Network, 2019), 11, https://taxjustice.net/reports/beneficial-ownership-in-the-investment-industry-a-strategy-to-roll-back-anonymous-capital/.

[8] See: Ramandeep Kaur Chhina and Alanna Markle, Defining and capturing information on the beneficial ownership of investment funds (s.l.: Open Ownership, 2024), https://www.openownership.org/en/publications/defining-and-capturing-information-on-the-beneficial-ownership-of-investment-funds.

[9] Companies listed on the main market of the LSE have key continuing obligations under the listing rules, the UK Corporate Governance Code, the FCA’s Disclosure Guidance, the Transparency Rules and Corporate Governance Rule, and the LSE’s Admission and Disclosure standards. The AIM is a specialised unit of the LSE, catering to smaller and growing companies from a wide range of countries and sectors. It was founded in 1995 and aims to offer a balanced approach to regulation, which is better suited to smaller companies, whilst offering appropriate investor protection.

[10] Please note that there is a difference between certificated shares and bearer shares. In the case of certificated shares, the ownership is directly tied to the person or entity named on the certificate. To transfer the ownership of certificated shares, the physical share certificate must be endorsed and physically delivered to the new owner or their representative. In the case of bearer shares, the ownership is not registered in any specific person or entity’s name but whoever holds the physical share certificate is deemed the rightful owner of the shares. To transfer the ownership of bearer shares, it simply requires transferring possession of the physical share certificate.

[11] See, for instance: Lucy Fergusson, “UK digitisation taskforce looks to abolish share certificates”, Linklaters, 18 July 2023, https://www.linklaters.com/en/knowledge/publications/alerts-newsletters-and-guides/2023/july/18/uk-digitisation-taskforce-looks-to-abolish-share-certificates; “CSDR: Commission proposes targeted changes; Countdown to application of Article 3”, Arthur Cox, 6 May 2022, https://www.arthurcox.com/knowledge/csdr-commission-proposes-targeted-changes-countdown-to-application-of-article-3/.

[12] There are roughly 80 major stock exchanges in the world with a combined value of USD 110.2 trillion. See: Dorothy Neufeld, “Mapped: The Largest Stock Exchanges in the World”, Visual Capitalist, 18 October 2023, https://www.visualcapitalist.com/largest-stock-exchanges-in-the-world. Depending on its laws, a country may have no stock exchange approved or there may be more than one stock exchange approved. For instance, in the US there are 13 stock market exchanges, and the major ones are NYSE and Nasdaq.

[13] There are also international CSDs that settle trades in international securities, such as eurobonds, although many also settle trades in various domestic securities, usually through direct or indirect (through local agents) links to domestic CSDs. Examples of international CSDs include Clearstream (previously Cedel), Euroclear, and SIX SIS.

[14] European Union Law, “Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC”, Official Journal of the European Union, EUR-Lex, latest version consolidated 9 January 2024, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32004L0109. Amended in 2013 by: European Union Law, “Directive 2013/50/EU of the European Parliament and of the Council of 22 October 2013 amending Directive 2004/109/EC of the European Parliament and of the Council on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market, Directive 2003/71/EC of the European Parliament and of the Council on the prospectus to be published when securities are offered to the public or admitted to trading and Commission Directive 2007/14/EC laying down detailed rules for the implementation of certain provisions of Directive 2004/109/EC”, Official Journal of the European Union, EUR-Lex, 26 November 2013, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32013L0050.

[15] On 25 November 2021, the Commission adopted a proposal for a European Single Access Point as set out in action 1 of the 2020 capital markets union action plan. See: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, “Capital markets union: Commission adopts package to ensure better data access and revamped investment rules”, European Commission, 25 November 2021, https://finance.ec.europa.eu/publications/capital-markets-union-commission-adopts-package-ensure-better-data-access-and-revamped-investment_en.

[16] For US laws and regulations governing the securities market, see: Office of the Legislative Counsel, U.S. House of Representatives, “The Laws That Govern the Securities Industry”, SEC, 1 October 2013, https://www.sec.gov/about/about-securities-laws.

[17] See: SEC, Final Rule, “Modernization of Beneficial Ownership Reporting”, 17 CFR Parts 232 and 240 [Release Nos. 33-11253; 34-98704; File No. S7-06-22] RIN 3235-AM93, 2023, https://www.sec.gov/files/rules/final/2023/33-11253.pdf.

[18] “Glossary – Beneficial Owner”, Nasdaq, n.d., https://www.nasdaq.com/glossary/b/beneficial-owner.

[19] SEC, “Determination of beneficial owner”, 17 CFR 240.13d-3, as amended 7 November 2023, https://www.ecfr.gov/current/title-17/chapter-II/part-240/subpart-A/subject-group-ECFR7ce825ff9acf140/section-240.13d-3.

[20] The term “person” is defined in the Securities Exchange Act as “a natural person, company, government, or political subdivision, agency, or instrumentality of a government”. See: Federal Government of the United States, “Securities Exchange Act of 1934”, Public Law 73–291, as amended through Public Law 117-328, enacted 29 December 2022, 11, https://www.govinfo.gov/content/pkg/COMPS-1885/pdf/COMPS-1885.pdf.

[21] 31 U.S.C. 5336(a)(3), added by CTA Section 6403(a).

[22] Andrew James Lom and Rachael Hashmall, “The Corporate Transparency Act is here—are you ready?”, Norton Rose Fulbright, January 2024, https://www.nortonrosefulbright.com/en/knowledge/publications/55b72cd0/the-corporate-transparency-act-is-here.

[23] Resolution CNV 687/2016. See: Andres Knobel, Regulation of Beneficial Ownership in Latin America and the Caribbean (s.l.: Inter-American Development Bank, 2017), 37; “Argentine Securities Commission Updates Regulation on Ultimate Beneficial Ownership”, Marval, 4 July 2023, https://www.marval.com/publicacion/la-cnv-adecua-su-normativa-sobre-beneficiario-final-15531&lang=en.

[24] OECD, Beneficial Ownership Disclosure in Asian Publicly Listed Companies (Paris: OECD, 2017), 18, https://www.oecd.org/daf/ca/Beneficial-Ownership-Disclosure-in-Asian-Publicly-Listed-Companies.pdf.

[25] Michele Riccardi and Ernesto Savona, The identification of beneficial owners in the fight against money laundering, (Trento: Transcrime – Universita degli Studi di Trento, 2013), 66, https://www.transcrime.it/wp-content/uploads/2013/11/BOWNET3.pdf; “Disclosure Requirements – Italy”, LuxCSD, 5 March 2024, https://www.luxcsd.com/luxcsd-en/products-and-services/market-coverage/europe-t2s/italy/disclosure-requirements-italy-1279872.

[26] FCA, “Section 5.1: Notification of the acquisition or disposal of major shareholdings”, Disclosure Guidance and Transparency Rules sourcebook, February 2024, https://www.handbook.fca.org.uk/handbook/DTR.pdf.

[27] “person – FCA Handbook”, FCA, n.d., https://www.handbook.fca.org.uk/handbook/glossary/G869.html.

[28] See: Cornell Law School, Legal Information Institute, “17 CFR § 240.13d-101 - Schedule 13D—Information to be included in statements filed pursuant to § 240.13d–1(a) and amendments thereto filed pursuant to § 240.13d–2(a)”, n.d., https://www.law.cornell.edu/cfr/text/17/240.13d-101.

[29] See: “Officers, Directors and 10% Shareholders”, SEC, 6 April 2023, https://www.sec.gov/education/smallbusiness/goingpublic/officersanddirectors.

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