BENEFICIAL OWNERSHIP BILL 2017
EXPLANATORY NOTES
These notes have been produced for the assistance of Members with the approval of the
Member in charge of the Bill, Hon Alfred Cannan MHK.
INTRODUCTION
These explanatory notes relate to the Beneficial Ownership Bill 2017. They have been
prepared by the Treasury in order to assist readers of the Bill. They do not form part of the
Bill and have not been endorsed by the House of Keys.
The notes need to be read in conjunction with the Bill. They are not, and are not meant to
be, a comprehensive description of the Bill.
In the opinion of the Member moving the Bill, its provisions are compatible with the
Convention rights within the meaning of the Human Rights Act 2001.
BACKGROUND
The Beneficial Ownership Bill 2017 is introduced against a background of important
international developments over the last few years.
Arising from a series of Action Plan Principles which were agreed at the G8 summit hosted
by the UK in Lough Erne in June 2013, the Isle of Man published an Action Plan in which it
agreed to review its existing provisions on beneficial ownership and consider whether the
introduction of a centralised registry would improve the transparency of the ownership and
control of companies in the Isle of Man.
A consultation paper was issued by the Cabinet Office in June 2014 on the Transparency of
the Beneficial Ownership of Companies and the responses, together with a summary of key
developments, were published in February 2016. The European Union’s Fourth Anti-Money
Laundering Directive 1, with a current proposal to further amend the Directive, has
subsequently raised the bar with the emergence of a new EU standard requiring the
Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the
prevention of the use of the financial system for the purposes of money laundering or terrorist
financing.
1
1
establishment of a central database of beneficial ownership accessible (at the very
minimum) by law enforcement authorities. At around the same time, the G5 grouping of the
five largest economies in the EU (the UK, France, Germany, Italy and Spain) announced its
commitment to a pilot initiative looking at the potential for automatic exchange of beneficial
ownership information; an initiative with which the Isle of Man has agreed to engage.
In consequence of negotiations between the Crown Dependencies and the Overseas
Territories, the Isle of Man signed an Exchange of Notes with the UK in April 2016
concerning the sharing of beneficial ownership information.
The Exchange of Notes was an important demonstration of the Isle of Man and UK’s
partnership to enhance the effectiveness of our long standing law enforcement cooperation
in respect of the ongoing sharing of beneficial ownership information. It recognised the
importance of the provision of such information for the prevention and detection of
corruption, money laundering, terrorism financing and other serious and organised crime.
The Bill seeks to place the commitments given in the Exchange of Notes and accompanying
documents on a statutory footing, particularly the commitment to introduce a central
database of beneficial ownership of the widest possible range of corporate and legal entities
incorporated in the Isle of Man by 30 June 2017.
The database will be accessible by listed competent authorities in the Isle of Man and
certain other governmental bodies within defined parameters. The database will also be
accessible, through request to the Financial Intelligence Unit (“the FIU”), to external
intelligence and law enforcement agencies in those countries with which the Isle of Man has
a beneficial ownership sharing agreement. At present, this stipulation restricts access to the
database only to the United Kingdom as per the Exchange of Notes.
The Bill repeals the Companies (Beneficial Ownership) Act 2012 (‘the 2012 Act’). Unlike the
2012 Act, the Bill covers a much wider range of entities, including companies formed under
the Companies Act 2006 (which, as entities in receipt of services provided by a regulated
person, were exempted from the 2012 Act). Certain provisions from the 2012 Act have been
imported into the Bill, with modifications where necessary, in addition to the provisions
which are required to introduce and oversee the central database.
FINANCIAL EFFECTS OF THE BILL
The consultation sought the views of those outside Government who will be affected by the
Bill in terms of compliance costs. Although no costs were quantified in the responses which
were received, some respondents highlighted the expectation that extra costs would be
incurred in complying with the legislation.
The financial effects for the Government are expanded upon in the accompanying Impact
Assessment. In headline terms, the following costs have been estimated:The Financial Intelligence Unit:
Year 1 £13,950 (staff plus equipment)
2
Year 2 £12,903 (staff)
Year 3 £13,161 (staff)
GTS:
£192,000 establishment costs and £10,000 per annum maintenance costs
DED:
£54,000 associated with populating the database and £67,000 in outreach costs to advise
entities of their new obligations.
The IOMFSA assumes an oversight role under the Bill to assess compliance with the Act. The
Authority will have to dedicate resources to a number of tasks to ensure that it is able to
fulfil its new obligations. It is anticipated that an initial additional resource of one full time
equivalent officer will be required, a requirement that will have to be reassessed as more
experience is gained of the Act’s operation. Regular reassessment will also be necessary to
ensure that the implementation of the regime is given the appropriate level of diligence and
oversight.
CLAUSE BY CLAUSE NOTES
Clause 1: Short Title
Clause 2: Commencement
The ‘Beneficial Ownership Bill 2017 (’the Bill’) has a standard commencement provision to
allow for different sections to come into force on different days.
Clause 3: Interpretation
This clause contains definitions for the Bill’s key terms. Subject to Tynwald approval, the
Treasury can by order amend the definition of the following terms:



‘beneficial ownership sharing agreement’;
‘external intelligence or law enforcement agency’;
‘permitted purposes’; and
‘registrable beneficial owner’.
Clause 4: Meaning of beneficial owner
This clause gives meaning to the term ‘beneficial owner’ to align it as far as possible to the
Exchange of Notes with the UK. The beneficial owner has to be a natural person and such
ownership can be traced through any number of persons or arrangements of any description
in order to identify and, where appropriate, submit the required details of that natural
person.
In order to aid understanding of the term, and compliance, the Isle of Man Financial
Services Authority may issue guidance on the meaning of ‘beneficial ownership’ and
associated terms.
3
The Treasury can revise the meaning of ‘beneficial owner’ by order, subject to Tynwald
approval.
Clause 5: Legal entities to which this Act applies
This clause sets out the legal entities to which the Act will apply to fulfil the Island’s
obligation to capture the widest possible range of corporate and legal entities incorporated
in the Isle of Man.
The Treasury can by order, subject to Tynwald approval, amend the Act’s scope.
Clause 6: Requirement to have nominated officer
This clause requires all legal entities to which the Act applies to appoint a nominated officer
who must be either a natural person resident in the Island or the holder of a licence issued
under section 7 of the Financial Services Act 2008 which permits the holder to carry on the
regulated activity of providing corporate services. A legal entity can have more than one
nominated officer and in such cases, their functions and liabilities under the Bill are joint and
several.
Clause 7: Notice of appointment of a nominated officer
This clause requires legal entities to give notice to the DED of its appointment of a
nominated officer. For those entities not utilising the savings provisions (clause 45) a notice
of appointment of a nominated officer has to be given to the Department of Economic
Development (‘the DED’) within one month of the section coming into force.
A legal entity must give notice to the DED within one month of a change in the details of its
record of a nominated officer, a change in the officer and the subsequent appointment of a
nominated officer.
A legal entity which fails to comply with this section commits an offence.
Clause 8: Record of nominated officer
This clause requires legal entities to keep a record of their nominated officers, including
written confirmation of the officer’s consent to the appointment.
A legal entity which fails to comply with this clause commits an offence.
Clause 9: Duty of legal owners
This clause imposes a duty on legal owners to ascertain the beneficial owner of their interest
in an entity.
If served with a written notice, the legal owner must notify the nominated officer within one
month of the required details (see clause 11) and supporting information in respect of each
beneficial owner of their interest.
Subject to a defence of taking reasonable steps to avoid the commission of an offence, a
legal owner who fails to comply with their obligations commits an offence.
4
The DED can make regulations in respect of the giving of notices under this clause and the
Treasury, by order and subject to Tynwald approval, can amend the relevant timeframe.
Clause 10: Duty of beneficial owners and intermediate owners to assist
This clause creates a duty on both beneficial and intermediate owners to assist the legal
owner to ascertain the beneficial owner of their interest in the legal entity. Failure to
cooperate is an offence.
Clause 11: Required details
This clause sets out the required details of beneficial owners which legal owners must notify
to nominated officers. The details (which the Treasury can amend by order subject to
Tynwald approval) will appear on the database of beneficial ownership.
In respect of a class of beneficial owners of such a size that it is not reasonably practicable
to identify each beneficial owner, the clause requires the submission of details sufficient to
identify and describe the class of persons who are beneficial owners.
Clause 12: Changes to required details
This clause requires certain legal owners to notify the nominated officer of any changes to
the required details within one month of that change occurring.
The DED can make regulations in respect of the giving of notices under this clause.
A legal owner who fails to comply with this section commits an offence.
Clause 13: Preservation of required details and verifying information
The clause sets out the requirements in respect of the preservation of required details and
verifying information by the nominated officer in a number of circumstances, including
following dissolution of an entity.
The DED can by order, subject to Tynwald approval, extend the period for which records
can be preserved.
Failure to comply with the section is an offence.
Clause 14: Further consequences of failure to disclose beneficial ownership
This clause sets out further consequences for a legal owner in the event of a failure to
disclose beneficial ownership information.
Before any actions are taken against the legal owner by the legal entity, the entity must
serve notice on the legal owner and the beneficial owner and allow the recipient of the
notice to make representations. The legal entity must consider any such representations
before taking action.
The legal owner may apply to the High Court to set aside any restriction or cancellation that
the legal entity may take.
5
Clause 15: Disclosure of beneficial ownership information by nominated officer
This clause requires nominated officers to disclose any beneficial ownership information they
hold that is specified or referred to in a notice served by a competent authority for a
permitted purpose within a specified period.
If a nominated officer fails to comply with this section they commit an offence.
The Treasury can make regulations to make further provision about the giving of notices. It
can also, by order and subject to Tynwald approval, amend the list of competent authorities
and length of time which nominated officers have to comply with any such notice.
Clause 16: Restrictions on further disclosure of information provided by
nominated officer
This clause restricts the further disclosure of information disclosed under clause 15. It does
not apply to the disclosure of information under clauses 17 and 28.
Clause 17: Disclosure of information obtained from a nominated officer by the
FIU when responding to external requests
This clause sets the parameters for disclosure by the FIU following requests from external
intelligence or law enforcement agencies. Section 25 of the Financial Intelligence Unit Act
2016 does not apply to information disclosed by the FIU under this clause2.
Clause 18: Tipping off resulting from issue of a notice by a competent authority
This clause concerns the tipping off resulting from the issue of notices by competent
authorities. Accordingly, a person commits an offence if they know or suspect that a notice
has been, or is going to be, issued and they disclose prejudicial information connected to
the issue of the notice.
Within defined parameters, disclosure by an advocate or legal adviser is not an offence and
it is a defence to prove that a person did not know or suspect that the disclosure was likely
to be prejudicial.
Clause 19: The Database
The Database is created under this clause, with a duty on the DED to establish and maintain
it and for the database to contain the required details and any changes thereto of all
registrable beneficial owners.
2
Section 25 of the FIU Act 2016 reads: Restrictions on further disclosure (1) Information disclosed by the
FIU under section 23 to any person or body must not be further disclosed except — (a) for a purpose connected
with any function of that person or body for the purposes of which the information was disclosed by the FIU, or
otherwise for any permitted purposes; and (b) with the written consent of the FIU. (2) Consent under subsection
(1) may be given — (a) in relation to a particular disclosure; or (b) in relation to disclosures made in
circumstances specified or described in the consent.
6
Clause 20: Compulsory submission of registrable beneficial ownership
information to the Department
This clause sets the parameters and timeframes for submission by the nominated officer of
registrable beneficial ownership information (and any changes thereto) to the DED.
There are offences for failure to comply with obligations in the clause and it makes provision
for the DED to accept payment for the late delivery of required information by way of
charging a fee (see clause 33).
The Treasury may by order, subject to Tynwald approval, amend the information in respect
of a registrable beneficial owner and the period within which the information has to be
submitted.
Clause 21: Voluntary submission of non-registrable beneficial ownership
information
This clause permits the voluntary submission of non-registrable beneficial ownership
information with the consent of the beneficial owner.
Clause 22: Beneficial ownership information to be submitted online
This clause establishes the requirement for beneficial ownership information to be submitted
online as the default position. There are exemptions from complying with this requirement,
but without such an exemption it is an offence not to comply with the obligations in the
clause.
Clause 23: Access to the Database
This clause sets the parameters for access to the database and for further disclosure of
information obtained through such access.
Clause 24: Mode of access
This clause permits the DED to determine the mode of access to the database and to make
regulations setting out further provisions about access but excluding the persons or bodies
who may have access (see clause 26).
Clause 25: Department not liable for accuracy of information submitted
This clause confirms that the DED is not liable for accuracy of information submitted onto
the database.
Clause 26: Persons who may access the Database
This clause sets out who can access the database. In addition to the competent authorities,
a limited number of further persons or bodies also have restricted access.
The Treasury can by order, and subject to Tynwald approval, amend the list of persons or
bodies able to access the database.
7
Clause 27: Restrictions on further disclosure of information accessed from the
Database
This clause restricts the further disclosure of information accessed from the database. A
person who fails to comply with this section commits an offence.
Clause 28: Disclosure of information from the Database by the FIU when
responding to external requests
This clause sets the parameters in respect of disclosure of information by the FIU when
responding to external requests. Section 25 of the FIU Act 2016 does not apply to
information disclosed under this clause3.
Clause 29: Tipping off resulting from access to the Database
This clause concerns tipping off as a result of access to the database. Accordingly, a person
commits an offence if they know or suspect that information on the database has been, or is
going to be, accessed and they disclose prejudicial information connected with such access.
Within defined parameters, disclosure by an advocate or legal adviser is not an offence and
it is a defence to prove that a person did not know or suspect that the disclosure was likely
to be prejudicial.
Clause 30 / Schedule 1: Oversight functions of the Authority
This clause provides for the oversight responsibilities for relevant persons by the IOMFSA.
Schedule 1 sets out additional powers in this regard.
Clause 31 / Schedule 2: Striking Off
This clause allows for the striking off of an entity from the relevant register where there is
reasonable cause to believe that the entity has failed or is failing to comply with its
obligations.
Schedule 2 sets out the necessary legislative amendments required to facilitate this clause.
Clause 32: Regulations
This clause makes further provision about the regulations the Treasury, the DED and the
IOMFSA are empowered to make under the Bill and provides Treasury with a general
regulation making power where it considers necessary to give effect to the Act.
Clause 33: Fees
The clause provides the power for the DED to set fees in respect of the legal entity’s
requirement to notify it of the appointment of a nominated officer (clause 7) and in respect
of the nominated officer’s obligation to submit beneficial ownership information (clause 20).
3
See footnote 2.
8
Clause 34: Appeals
This clause sets out the appeal route to the Financial Services Tribunal against decisions
made by the DED in respect of whether a nominated officer is exempt from the requirement
to submit beneficial ownership information online. The Tribunal can also hear appeals
against the imposition of civil penalties by the IOMFSA (see paragraph 8 of schedule 1).
A decision of the Tribunal is binding although a further appeal lies to the High Court on a
point of law.
Clause 35: Offences by legal entities other than natural persons
This clause stipulates that if an offence is committed by a legal entity and it is proved that
one of its officers was complicit, the officer as well as the entity is guilty of the offence and
is liable to the penalty provided for the offence.
Clause 36: Confidentiality
This clause provides that a requirement imposed under this Bill has effect despite any
obligation as to confidentiality or other restriction on the disclosure of information imposed
by statute, contract or otherwise. Therefore, a disclosure made or the sharing of information
in accordance with the Bill does not breach any obligation of confidence or any other
restriction on access to or disclosure of the accessed information (subject to clause 37).
Clause 37: Data Protection Act 2002 not affected
This clause provides that the Data Protection Act 2002 is not affected by this Bill, meaning
that nothing authorises a disclosure in contravention of that Act of personal data which is
not exempt from its provisions.
Clause 38: Freedom of Information Act 2015
This clause makes explicit that the existing exemption under the Freedom of Information Act
2015 for information the disclosure of which is restricted by law also applies to information
prohibited from disclosure under this Bill.
Clause 39: Privileged information
This clause provides that nothing in the Bill compels the production or divulgence by an
advocate or other legal adviser of an item subject to legal privilege, but an advocate or legal
adviser may be required to give the name and address of any client.
Clause 40: Other provisions concerning beneficial ownership not affected
This clause ensures that the operation of the Bill does not limit or otherwise restrict any
other statutory provision concerning beneficial ownership and sets out some examples
thereof.
9
Clause 41: Other disclosure provisions not affected
This clause provides that the operation of a power or duty in the Bill to disclose information
does not affect the operation of any other power or duty to disclose information which exists
in this Bill or any other enactment or any restriction on such disclosure.
Clause 42 / Schedule 3: Statement of compliance in annual returns
This clause creates the requirement for a statement of compliance with the obligations in
the Bill in annual returns. A legal entity must confirm that both it and its nominated officer
have each complied with their respective obligations; the required details in respect of any
registrable beneficial owners have been submitted; and all information submitted is up-todate and correct. The statement must be countersigned by the nominated officer.
Schedule 3 sets out the necessary legislative amendments to facilitate this clause.
Clause 43 / Schedule 4: Compulsory online submission of annual returns for
companies
This clause provides for the compulsory online submission of annual returns for companies.
Online filing of annual returns is not yet technologically possible, but the Government has
commenced the necessary preparatory work which, when complete and properly tested, will
allow this clause to be brought into force.
Schedule 4 sets out the necessary legislative amendments to facilitate this development.
Clause 44: Consequential amendments
The Bill makes a small number of consequential amendments to the Financial Services Act
2008 to align the appeals under this Bill within the scope of the Financial Services Tribunal
and to add this Bill to the list of other Acts which confer functions on the IOMFSA.
Clause 45: Savings
This clause provides for transitional arrangements which allow nominated officers and
certain registered agents under existing legislation to act as nominated officers under this
Bill without requiring the relevant legal entity to give notice to the DED of the appointment.
Clause 46: Repeals and revocations
The Companies (Beneficial Ownership) Act 2012 is repealed and the secondary legislation
made under it is revoked by this Bill.
10