Robust definitions

Beneficial Ownership should be clearly and robustly defined in law, with low thresholds used to determine when ownership and control is disclosed

  • Robust and clear definitions of beneficial ownership (BO) should state that a beneficial owner should be a natural person. Definitions should cover all relevant forms of ownership and control, specifying that ownership and control can be held both directly and indirectly.
  • There should be a single, unified definition in law in primary legislation, with additional secondary legislation referring to this definition.
  • The definition should comprise a broad catch-all definition of what constitutes BO, and couple this with a non-exhaustive list of example ways in which BO can be held.
  • Thresholds should be set low so that all relevant people with BO and control interests are included in disclosures. A risk based approach should be considered to set lower thresholds for particular sectors, industries, or people. Particular consideration should be given to thresholds that apply to ownership by politically exposed persons (PEPs), with a clear definition used to determine what constitutes a PEP.
  • Absolute values, rather than ranges, should be used to define a beneficial owner’s ownership or control.

Clearly defining beneficial ownership and ensuring it covers all relevant forms of ownership and control makes the disclosure regime less vulnerable to exploitation by those seeking to abuse the system.

Using low thresholds to determine ownership or control reduces the risk that someone with relevant ownership or control remains hidden. While extremely low thresholds may become too labour or cost intensive without providing useful insight into significant ownership or control, using thresholds that are too high can create a potential loophole that can be exploited.

Particular consideration should be given to the thresholds that apply to PEPs with ownership or control interests. Lower thresholds may be warranted for PEPs to be disclosed as beneficial owners based on the increased corruption risk associated with them.

Rather than ranges, collecting absolute values when disclosing the percentage of ownership or control assists users in understanding how ownership or control is held. This is particularly important when ownership or control is held indirectly. Where possible, definitions should be harmonised regionally and internationally, or similar minimum standards should be adopted.


Resources

Beneficial Ownership in Law: Definitions and Thresholds
Peter Low & Tymon Kiepe · Oct 2020

To maximise the impact of beneficial ownership (BO) registers, it is important to minimise loopholes and make data as useful as possible. A legal definition of BO and its associated thresholds form the foundation on which a disclosure regime is built. This policy briefing aims to help policymakers and those implementing or supporting beneficial ownership transparency to think through the decisions required to define BO in law and to set appropriate thresholds, and how to operationalise these.

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