SINCE the amendments to Jamaica’s Companies Act, beneficial ownership has assumed greater significance for companies incorporated or registered under the Companies Act of Jamaica (“Company”).

The amendments introduced a more robust framework for identifying and reporting the individuals who ultimately own, control or exercise significant influence over a company, requiring them to look beyond the names appearing on its register of members. Importantly, beneficial ownership is not determined by shareholding alone: An individual may qualify as a beneficial owner because of the control or influence capable of being exercised over it, regardless of formal ownership structure. Regardless of a company’s size or the complexity of its structure, identifying its beneficial owners therefore requires a meaningful assessment of who ultimately owns or controls the company — it is not simply a tick-box exercise.

Determination of the beneficial owners

A common misconception is that beneficial ownership is determined exclusively by the number of shares a person owns. While ownership is an important part of the analysis, it is only a part of the picture. In determining beneficial ownership, a Company must first identify any individual who holds 25 per cent or more, of the shareholding in that company. Those persons who meet the 25 per cent threshold, are automatically beneficial owners of the Company. Additionally, the company must then look beyond direct ownership and consider any individual who exercises ultimate effective control through other means, such as the ability to appoint or remove directors or determine the company’s policy. Finally, the Company must consider whether an individual has the ability to influence management or decision-making. The exercise may therefore result in more than one beneficial owner and an individual being a beneficial owner in more than one capacity. Importantly, the exercise does not begin and end with identifying the company’s shareholders.

For companies with layered ownership structures, the exercise should consequently not end when the immediate corporate shareholder is identified. The ownership and control chain should be examined to determine the ultimate individual or individuals who sit at the top of the structure.

Why does beneficial ownership matter?

The Companies Act includes various obligations for companies, including requirements to identify their beneficial owners, obtain and maintain prescribed beneficial ownership information, keep that information “accurate, adequate and up to date”, and make the required disclosures to the Registrar of Companies within certain timelines. For example, companies are required to file changes in beneficial ownership within 14 days of such change.

The 2023 amendments to the Companies Act include provisions giving companies mechanisms to ultimately repurchase a shareholder’s shares, where that shareholder fails to provide beneficial ownership information, underscoring that non-compliance by members and beneficial owners can have consequences beyond ordinary regulatory penalties. These requirements operate alongside enforcement provisions and sanctions for non-compliance, for the Company, making beneficial ownership an ongoing corporate compliance responsibility rather than an exercise undertaken only when an annual return or other filing becomes due.

It is not a one-time exercise

Importantly Companies must approach beneficial ownership compliance as more than simply another box to tick when incorporating a company or making a Companies Office filing on an annual basis.

Ownership and control can change. Shares may be transferred, corporate groups may be re-organised, shareholders may themselves undergo ownership changes, or arrangements affecting control may be introduced or terminated. A change occurring several levels above a company may therefore affect its beneficial ownership information even though there has been no change to the company’s immediate registered shareholders.

Companies should accordingly have procedures for periodically reviewing their beneficial ownership information and identifying events that may require it to be updated.

Looking beyond the register

The central question in beneficial ownership compliance is ultimately a simple one: who is the individual or individuals who ultimately owns or controls the company?

The answer, requires more than reviewing the register of members. For Companies — particularly those forming part of multinational or multi-layered corporate groups — effective compliance requires an understanding of both ownership and control and a willingness to look through the corporate structure to the individuals who ultimately stand behind it.

Beneficial ownership should therefore be regarded not merely as a filing requirement, but as an ongoing component of sound corporate governance and regulatory compliance, underpinning greater corporate accountability and financial transparency.

Joanna Marzouca is an associate at Myers, Fletcher and Gordon and a member of the firm’s Commercial Department. She may be contacted at Joanna.Marzouca @mfg.com.jm or through the firm’s website www.myersfletcher.com.

This article is for general information purposes only and does not constitute legal advice.