Who Can Be a Beneficial Owner in an Offshore Company?

In the context of corporate structure—particularly those incorporated offshore—a beneficial owner in a company is an individual who ultimately owns or controls a legal entity, even if they’re not explicitly listed in the public registry. This is a concept that has become increasingly important as part of global regulatory efforts to mitigate illicit activities, tax non-compliance, and opaque business practices.

Given that a beneficial owner can influence or direct operations and decision-making from afar, there are naturally specific rules that jurisdictions apply to their use. Among these are guidelines or regulations around who is considered to act in this capacity. 

We’ve put together this article to focus on the legal definitions, eligibility criteria, and international standards relating to those regarded as a beneficial owner in a company. Importantly, as Ascot provides global incorporation services, the information in this guide applies across jurisdictions. As a result, it’s particularly relevant to international entrepreneurs seeking clarity on ownership transparency.

What Is a Beneficial Owner?

By definition, a beneficial owner is a natural person who has ownership or control over a company but whose name doesn’t appear as the owner on public records. A beneficial owner is very different from a legal owner, who exerts similar control over a company while being explicitly identified on all relevant public registries. In both offshore and onshore contexts, a nominee shareholder, a trust, or other corporate entity might be appointed to be named as legal owner on the beneficial owner’s behalf.

It is essential to understand the distinction between legal and beneficial ownership, as regulatory authorities are increasingly concerned with transparency and ensuring the person with the real economic interest is complying with all relevant laws and tax statutes. Indeed, while it is only the legal owner that is identified on public records, many jurisdictions maintain a beneficial ownership registry that is not publicly viewable, but on which all such owners of any company must be listed. This ensures that regulators have the information needed to monitor and, if necessary, investigate corporate structures.

Legal Criteria for Being a Beneficial Owner

When it comes to maintaining compliance, it’s important to understand what the relevant jurisdictional authorities and international agencies consider defines a beneficial owner. The related thresholds and identifiers across the world are largely informed by global regulatory bodies such as the Financial Action Task Force (FATF), the European Union’s Anti-Money Laundering (AML) directives, and the Organisation for Economic Co-operation and Development (OECD) guidelines on transparency.

Among the common thresholds applied in legislation is that of ownership percentage. For instance, a person owning 25% or more of a company’s shares or voting rights is likely to be defined as a beneficial owner. That said, many jurisdictions don’t just look at share percentages but also control mechanisms, such as board appointment rights and the ability to influence strategic decisions. Beneficial ownership criteria will also incorporate control that is not just exerted directly, but also through intermediaries and trusts. The goal is to include all individuals who have a meaningful ability to affect the company’s conduct in ownership definitions.

Who Can Be a Beneficial Owner in a Company?

Those who qualify as a beneficial owner in a company come in various forms. These include:

• Natural persons with direct ownership – The most straightforward example, these natural persons have direct ownership of shares that exceed the relevant percentage of equity threshold.
• Individuals using other entities – This is where an individual holds their interest through one or more intermediary companies. In these instances, ownership is traced through each layer until the ultimate natural person is identified as the beneficial party.
• Those exerting influence – Individuals can also qualify as beneficial owners if they don’t hold significant shares, but still exert control over a company through their voting rights, management agreements, or other contractual arrangements.
• Trust beneficiaries – In special cases, beneficiaries of a trust that legally has ownership stakes, its settlor (the person who created the trust), and sometimes the protector (an appointed overseer) may all be regarded by regulatory bodies as beneficial owners.
• Nominee shareholders – In some special cases in which nominee shareholders or directors are used, the person on whose behalf they act is deemed to be the beneficial owner.

Common Structures Involving Beneficial Ownership

There are various common corporate setups in which the beneficial owner is not always immediately apparent. For instance, layered company structures, where ownership tends to be held through multiple countries that are located in different jurisdictions, may obscure the identity of the ultimate owner. Perhaps more commonly, nominees and intermediaries are frequently utilized for offshore structures to maintain privacy, while the appointing party is the true beneficial owner. Multijurisdictional holdings are another quite opaque approach involving beneficial ownership, whereby the chain of ownership spans multiple countries that have varying disclosure requirements.

In each of these cases, though, beneficial ownership is still reportable under most regulatory regimes. Even when legal titles are routed through different offshore vehicles and representative parties are appointed, international frameworks will require transparency on the ultimate recipients of profits and controllers of organizations.

Why Beneficial Ownership Must Be Declared

Particularly when looking into how long does it take to register an offshore company, some entrepreneurs may wonder why they need to take the time to register beneficial ownership at all. The rationale for disclosing the root of ownership is connected to regulatory imperatives. Essentially, bodies worldwide see this an important part of the diverse administrative tools available for ensuring fairness and mitigating space for crime to occur. In particular, regimes are keen to promote anti-money laundering (AML) protocols, counter-terrorism financing processes, and tax transparency initiatives, such as the Common Reporting Standard (CRS). By identifying the individuals who truly control companies, regulators and governments can better prevent the misuse of corporate structures for illicit purposes.

Beneficial ownership registers are increasingly common, with authorities mandating that owners are listed, while not always making these records available for public viewing. Such registers enable financial institutions, regulators, and law enforcement to access accurate information about the individuals behind corporate entities.

Privacy vs Transparency in Offshore Jurisdictions

Different jurisdictions adopt varying approaches to balancing owner privacy with disclosure obligations. For instance, in the U.K. and the E.U., beneficial ownership registers are made public and are able to be accessed by anyone. This aligns with these jurisdictions’ commitment to business transparency, although it can raise privacy concerns for some business owners.

Other jurisdictions, like the British Virgin Islands or Seychelles, maintain private or protected registers. These are only accessible to regulators, registered agents, and law enforcement bodies. This allows regulatory oversight while providing potential for strategic public anonymity. Nevertheless, even in these private jurisdictions, it is still often mandatory to declare ultimate ownership to corporate agents and regulators.

Consequences of Misreporting or Concealing Beneficial Ownership

Correct declaration of beneficial ownership in alignment with domestic and international laws is essential. Aside from the clear ethical imperatives, there are also some significant consequences for failing to provide ownership information or attempting to conceal beneficiary ownership. These include financial fines and regulatory sanctions, which can give an unintentional hike to prices when exploring how much does it cost to open an offshore company. Additionally, business licenses may be suspended, and both individuals and companies may be denied corporate services or bank account access. In severe cases, misrepresentation or concealment can lead to criminal charges.

This makes it especially vital for companies operating offshore to commit to full and accurate disclosure. Owners must research the requirements both at home and in the jurisdictions companies are operating in and ensure they follow correct procedures. Experienced advisors and offshore company formation consultants can provide useful insights here.

FAQs

Can a company be its own beneficial owner?

No, only a natural person can be classified as a beneficial owner under global standards.

Does nominee ownership hide the beneficial owner?

No, the use of nominees must be declared and beneficial owners disclosed to registered agents or authorities.

Are there countries where beneficial owners remain completely anonymous?

Few, if any, jurisdictions now allow complete anonymity. Most require at least confidential disclosure, even if not public.

Can more than one person be a beneficial owner?

Yes, multiple individuals can qualify if they meet the ownership or control thresholds.

Do beneficial owners need to be listed on company documents?

Not always in public filings, but they are usually recorded internally and submitted to registered agents.

References

OECD. (2024, July 25). Beneficial Ownership and Tax Transparency – Implementation and Remaining Challenges. OECD. https://www.oecd.org/en/publications/2024/07/beneficial-ownership-and-tax-transparency-implementation-and-remaining-challenges_616488db.html 

FATF. (2024, March 11). Beneficial Ownership. FATF. https://www.fatf-gafi.org/en/topics/beneficial-ownership.html