Public beneficial ownership register: Treasury Paper released

The Government proposes to implement a public register of beneficial ownership to record who ultimately owns, controls, and receives benefits from companies and other legal vehicles operating in Australia.

The proposed regime is part of the Government’s election promise to ensure that “multinational entities pay a fairer share of tax” and may impose a significant compliance burden on millions of Australian entities.

The new regime is to be modelled on the current UK regime, but with lower thresholds, and will be introduced in phases. 

The first phase will cover entities regulated under the Corporations Act 2001 – including Australian proprietary companies, unlisted Australian public companies, unlisted Australian registered MISs, and unlisted Corporate Collective Investment Vehicles (CCIVs). These entities will be required to maintain registers of certain beneficial owners (including natural persons). Future phases are intended to include a centralised public register and encompass additional types of entities.

Regulated entities would be expected to take “reasonable steps” to identify and verify their beneficial owners, and to develop and maintain an accurate, up-to-date, publicly accessible beneficial ownership register.

Regulated entities will also be required to issue notices to their owners to obtain the relevant information and to verify the identity of beneficial owners before entering them onto the register. Penalties will be imposed on the Regulated Entities, their officers and the ultimate beneficial owners for non-compliance.

Certain information is to be made public, while other information is to be kept secret for the personal safety of individuals.  For example, it is proposed that the name of a beneficial owner and their month and year of birth will be disclosed, but not the day within the month. The Government is seeking input in respect of the privacy implications of the proposed regime. The requirement for individual’s personal information to be made publicly available does seem at odds with the current privacy reforms.  Making available individuals’ names, their month and year of birth and their contact details in connection with ownership of shares may also make them appealing targets for cyber criminals.

The proposal raises a number of other issues:

• There is no detail as to the size of the entities that the regime will apply to. The limits of its application will be important because of the significant compliance burden in establishing and maintaining a register, including the need for relevant entities to have processes in place to adequately protect information that is to be kept secret e.g. from acts of fraud, cyber-attacks.
• The Consultation Paper does not mention the treatment, or tracing through, of entities such as partnerships, LLPs and LLCs.
• It is unclear how it is intended that entities can comply if, for example, non-resident owners refuse to provide the details required e.g. fund managers and general partners are generally bound by confidentiality arrangements with their investors and may not be able to comply with notices requesting information about beneficial ownership. What would be “reasonable steps” in such circumstances? Would the Restrictions Notice regime (which will restrict holders from transferring their interest and receiving returns) be required to be implemented in such cases? Should investors be given an opportunity to exit the investment first?
• The Consultation Paper contemplates are fairly rigorous verification process to ensure the register is accurate and up to date. Some third-party identity verification methods may require the processing of sensitive information (such as government IDs, biometric facial recognition, and likeness checks). Treasury’s privacy impact assessment will need to consider what safeguards need to be implemented to manage the processing of sensitive personal information by third parties.
• Thought should be given as to whether these measures may affect decisions by foreign investors to invest in Australian businesses.

Proposed content of a register

Beneficial Owners (Natural Persons)