The misuse of corporate vehicles for illicit purposes by, among other means, concealing the identity of the beneficial owners of the company has been the subject of several studies conducted by the Financial Action Task Force, the United Nations Office of Drugs and Crimes (UNODC) and other similar bodies. Based on these studies, several recommendations have been made to countries, including Jamaica, as to how to eliminate this misuse of corporate vehicles.
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.
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 “rinse” 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
Currently, the Companies Act requires local companies to maintain a Register of Members (the “Register”) 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. Prior to the Amendments, the Register contained the names and other prescribed particulars of the members of the company.
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, companies were not required to keep a record of the beneficial owners of the company. Notice of beneficial ownership was also not capable of being registered with the Registrar of Companies (the “Registrar”) as the Registrar was precluded from receiving notice of a trust.
With the passing of the Amendments, companies must maintain a Register of the names, addresses, occupations and nationalities of the beneficial owners as well as the legal 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 beneficial owner or the legal owner to provide the requisite information renders the relevant person liable to a fine not exceeding $500,000.00.
Annual Returns
Companies are now also required to include the names and other required particulars of the beneficial owners of their shares in their Annual Returns required to be filed with the Registrar.
This new requirement will mean that public searches conducted at the Companies Office of Jamaica will disclose not only the names and particulars of all the legal owners (as was previously the case) but now, also the beneficial owners.
Share Warrants
A share warrant is a document issued under a company’s common seal that states that the holder of the document is entitled to the shares indicated in the document as well as the payment of future dividends in relation to those shares.
The Amendments have removed a company’s power to issue share warrants. All companies must remove the power to issue share warrants from their articles of incorporation or articles of association, as the case may be, within 18 months of the commencement date. Further, all persons holding share warrants on the commencement date are deemed to be members of the company.
Overseas Companies
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 have now imposed 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 now also a requirement for the overseas company to maintain a register of its members (the “overseas branch register”) at one of its offices in Jamaica. The information required for registration is also required for the overseas branch register.
For overseas companies that were registered prior to the commencement date of the Amendments, the Amendments allow a grace period of three months within which they must comply with the requirement to maintain the overseas branch register.
Effect
In the Mutual Evaluation of Jamaica 2017 conducted by the Financial Action Task Force, Jamaica was ranked as only partially compliant due to the fact that Companies Act still contained provisions allowing for the issue of bearer shares and for the concealment of the identity of beneficial owners.
The introduction of these Amendments to the Companies Act has allowed Jamaica to become fully compliant with its international obligations.
Chantal Simpson is an Associate at Myers, Fletcher and Gordon in the Commercial Department. She may be contacted at chantal.simpson@mfg.com.jm. This article is for general information purposes only and does not constitute legal advice.
