Company beneficial ownership disclosure becomes compulsory next year

Sri Lankan companies’ beneficial ownership disclosure has been made compulsory to ensure greater transparency of its profiles as well as financial affairs, Fiscal Policy Department (Ministry of Finance) sources affirmed.

At present there was no mechanism to find out beneficial ownership including details of shareholders with more than 25 per cent stake of a company (excluding Limited Public liability Companies) or beneficiaries who have active control of such a company.

New amendments to the Companies Act will be enacted in parliament by June 2024 relating to the requirements on beneficial ownership measures fully aligned with the Financial Action Task Force (FATF) standards, an official of the department disclosed.

The Register General of companies (RoC) will have to maintain a separate register on beneficial ownership, he said adding that it has to provide information for investigative purposes as a government institution, he emphasised.

There is also no mechanism to facilitate timely access by competent authorities to beneficial ownership information, an IMF report revealed.

To this end, the RoC working together with the Financial Intelligence Unit (FIU) and other relevant authorities, has formulated draft amendments to the Companies Act to fully align its legal framework for legal persons with the FATF standards.

These draft amendments are pending final review by the authorities for submission to Parliament for approval and adoption next year, a ministry official said.

Law enforcement agencies currently access beneficial ownership information through records maintained by financial institution, he disclosed.

While the Companies Registrar maintains basic legal information on companies, given the current legal gaps, beneficial ownership information is not widely available through the Registrar. Law enforcement agencies also have access to records held by financial institutions.

Nevertheless, given the gaps in the current Companies Act, information provided by companies to their financial institutions on beneficial ownership might not be comprehensive or accurate, he added.

Law enforcement agencies currently access beneficial ownership information through records maintained by financial institution, he disclosed