Newsletter – Vol. 30, Issue 1, March 2018
The use of corporate vehicles for illicit purposes has been the subject of several studies conducted by the Financial Action Task Force, the United Nations Office of Drugs and Crimes and other similar bodies. Based on these studies, several recommendations have been made to countries, including Jamaica, as to how to eliminate the misuse.
It is not uncommon for individuals, when structuring their shareholdings, to opt for a structure that protects the identity of the true owners of the shares of the company, concealing the identity of the beneficial owner of the company.
This may be for a number of reasons, many of which are legitimate and involve no elements of illegality. However, this layer of privacy has been acknowledged as one of the mechanisms utilised by money launderers when seeking to “launder” their money by placing it in legitimate investments.
The Companies (Amendment) Act, 2017 (the “Amendments”) which came into force on June 21, 2017 (the “commencement date”) has been lauded by members of the Senate for the fact that its provisions allow for, among other things, greater transparency with respect to companies incorporated and registered in Jamaica. The record keeping and reporting requirements introduced by the Amendments have been seen as important tools in the fight against money laundering.
Register of Members -The Companies Act requires local companies to maintain a Register of Members at their registered office or some other place designated in Jamaica for that purpose. The Register should be available for inspection at the times prescribed by the Companies Act.
It is possible to create legal arrangements by which the person who is named in the Register (the “legal owner”), holds the shares on behalf of another person (the “beneficial owner”). The beneficial owner is the person entitled to receive dividends and is thus entitled to direct the votes in relation to the shares.
Prior to the Amendments, the Register was required to contain the names and other prescribed particulars of the members of the company but not the beneficial owners. Notice of beneficial ownership was not capable of being registered with the Registrar of Companies as the Registrar was precluded from receiving notice of a trust.
With the passing of the Amendments, a company must maintain a Register of the names, addresses, occupations and nationalities of the legal and beneficial owners of its shares. The company must also send periodic requests to legal owners for notification of changes in beneficial ownership. The Amendments also impose an obligation on the beneficial owner of the shares to provide the legal owner with the information required for the Register and further, an obligation on the legal owner to provide the company with such information.
Failure of the company to maintain the Register as required or failure of the legal or beneficial owner to provide the requisite information renders the defaulting person liable to a fine not exceeding $500,000.00.
The names and other required particulars of beneficial owners must be included in the Annual Returns. The Companies Office of Jamaica will now disclose not only the names and particulars of all the legal owners but also beneficial owners.
Share Warrants – A share warrant is a document issued under a company’s common seal that states that the holder is entitled to the shares indicated in the document, as well as, the payment of future dividends.
The Amendments have removed a company’s power to issue share warrants and any such provision contained in a company’s Articles of Incorporation or Articles of Association, within 18 months of the commencement date. Persons holding share warrants on the commencement date are deemed to be owners of the shares and members of the company.
Prior to the Amendments, when registering a branch of an overseas company under Part X of the Companies Act, there was no requirement to provide the names of the shareholders of the overseas company.
The Amendments impose a requirement to indicate the names and particulars of the members of the overseas company in the application for registration. Where there are any changes made to the shareholders, notice must be given to the Registrar within 28 days of the change. There is also a requirement for the overseas company to maintain, at one of its offices in Jamaica, a register of its members which must include the information required for registration.
The introduction of these Amendments to the Companies Act has allowed Jamaica to become fully compliant with its international obligations.
Please Note: This article is for general information purposes only and does not constitute legal advice