New category added to beneficial ownership Database

The Isle of Man Financial Services Authority is seeking to raise awareness of the introduction of a new category within the Island’s beneficial ownership Database.

‘Control as Liquidator’ has been added as an option in order to provide further clarity around an area where historically there has been some confusion, and to provide a clear distinction in the Database where control of a legal entity sits with the appointed liquidator.

The new nature of interest category is now available to nominated officers, having been created by the Department of Enterprise. It follows feedback received by the Authority during a period of enhanced outreach and inspections to test compliance with the Beneficial Ownership Act 2017 (“the Act”).

The Authority, which is responsible for overseeing compliance with the Act, noted a degree of confusion among nominated officers about whether a liquidator could or should be recorded on the Database.

The 2017 Guidance does include liquidators in a list of roles and relationships which would not, on their own, result in that person being considered to be exercising control for the purposes of the Act. However, the guidance further states those individuals may be considered to be a person with significant control over the entity if the role or relationship forms one of several opportunities which that person has to exercise significant influence or control.

Relevant persons are reminded of the definition of beneficial owner as set out in section 4(1) of the Act – “a natural person who ultimately owns or controls a legal entity to which this Act applies, in whole or in part, through direct or indirect ownership or control of shares or voting rights or other ownership interest in that entity, or who exercises control via other means”.

As the mind and management of a company is vested with the liquidator from the moment of their appointment, the liquidator will typically be in a position in which they are capable of exercising significant control over the company. Relevant persons will be required to determine whether this control meets the threshold of a registrable beneficial owner (being 25%+ of the total control exerted on the company).

Relevant persons must also determine whether the pre-liquidation beneficial owner still draws an economic benefit from, or exerts control over, the company, and, as such, whether or not it is appropriate for their details to remain on the Database.