Corporate or Individual nominee shareholder services

Shielding the identity of a beneficial owner from a public exposure is becoming difficult, sometime impossible and is definitively a challenge in term of compliance.

The Financial Action Task Force (FATF) issued a Guidance on transparency and beneficial ownership in 2014 this was also followed by an OECD beneficial ownership toolkit in 2019 plus numerous other recommendations and implementations leading to new era of transparency.

The fact is that if law enforcement agencies as well as financial institutions and other finance professionals should access rapidly to the right and updated information it remains questionable to have such sensitive data accessible by anybody.
Today the technology exists to protect data from unwanted curiosity, having publicly accessible register of beneficial ownership is a non-sense.

Obviously not all the countries will implement a public register and the general public will not know how to access easily such sensitive information, in short, the UK Companies House shouldn’t become the new norm.

Is the use of a corporate or an individual nominee shareholder still interesting?

In the past many clients used such services to shield themselves for tax authorities, Today Financial Institutions are detecting the nominees and professionals such as Trust and Corporate Services Providers, law firms and wealth managers are anyway communicating about the beneficial owners.

As a result, it became more difficult to companies with nominees to obtain and to maintain a corporate bank account with a financial institution and also it raised the suspicion level on many legitimate operations.

Because of the Automatic Exchange of Financial Account Information (“AEOI”) the use of nominees for a tax avoidance is no more effective in all participating countries.

As a matter of fact, business freedom and right to privacy still exists although under heavy pressure in numerous jurisdictions.

Using the services of nominees will not protect the beneficial owners from being exposed with Beneficial Ownership or Controllers Registers, but in certain cases it could limit the public exposure (so the risks) for persons in need of such services.

Corporate versus individual nominee shareholder

Should the nominee blatantly appear for what it is, using the services of XYZ nominee services Limited? Should this be more discreet with a corporate shareholder “used” multiples times by your service provider?

We believe that the best solution is the incorporation of a Seychelles company with the same name plus an additional word such as Holdings, Capital, International, to be the corporate shareholder. The Seychelles don’t have a public register of directors and shareholders.

This offers a better control, has many advantages in term of onboarding process with Financial Institutions, and is allowing discreet change of ownership.

An individual nominee shareholder exposure to debtor’s harassment and potential legal threats makes it difficult to find a candidate.

In addition, an individual nominee shareholder should demonstrate living standards and affordability for the shares he (officially) owns otherwise his credibility is NIL.

Nominee shareholder services in Hong Kong

A person who holds, directly or indirectly, more than 25% of the issued shares in the company, is a significant controller. Therefore, shareholders are the significant controllers of your company and the particulars of shareholders with more than 25 % of the shares should be entered into the significant controllers register.

But in Hong Kong the significant controllers register isn’t publicly accessible, so the nominee shareholder services are still of interest.

The Hong Kong Company shareholders particulars are easily accessible against a small fee on internet, with an offshore (Seychelles IBC) company as privacy layer the beneficial owners are protected from undue visibility.