Shareholder Declarations
Introduction
This article summarises the implications of recent amendments to the Companies Act of Trinidad and Tobago (the Companies Amendment Act No. 6 of 2019) and the fines and duties imposed, from a Trinidad lawyer's perspective.
The Companies Amendment Act No 6 of 2019
The Companies Amendment Act No 6 of 2019 (“the Amendment”) was assented to on 4th April 2019 and, because section 2 provided that it comes into effect on such date as is Proclaimed by the President, did not become law until 1 May 2019 when section 10A was proclaimed and thereafter on 30 May 2019 when sections 1 to 10 and 11 were proclaimed (see respectively Legal Notices 89 and 112 of 2019).
In summary, the Amendment addresses the issue, exchange, and conversion of bearer shares (shares with no name) and introduces new regulatory reporting requirements for “beneficial ownership” of shares, i.e. where the real owners of the shares are not listed as shareholders. The rationale is to prevent the ‘secret’ holding of shares by requiring all shareholders to declare if some other person holds or exercises controls over their shareholding.
Beneficial Ownership
Section 9 of the Amendment introduces the new section of “Beneficial Ownership” into the Act. The beneficial owner is defined to be a natural person, even if it is a corporation sole, a body corporate, or an international organization. The beneficial owner is the natural person on whose behalf a transaction is being conducted or who exercises ultimate effective control over a legal person or arrangement.
In respect of companies, the person is the natural person who ultimately owns or controls the company through direct or indirect ownership or control or if no such person can be identified or there is doubt that the person identified with the controlling interest is the beneficial owner, then the natural person who exercises control of the legal person or arrangement by other means. If there is no such person or doubt as to such person, then it is the person who holds the position of senior managing official.
The Amendment identifies persons in respect of trusts and other legal arrangements.
The Amendment does not apply to companies listed in a regulated market that is subjected to disclosure requirements that provide for adequate transparency of ownership information.
Company Obligations
A company is required within 12 months of the coming into force of the Amendment, to ascertain who are its beneficial owners and file the applicable annual notice (Section 337B). It does so by issuing the prescribed form to its shareholders requiring them to declare the beneficial ownership in their shares. Companies must annually verify the accuracy of its information on record by its annual return and annually send such notice to its shareholders.
Where a company fails to take reasonable steps to ascertain and obtain all information as to the beneficial owners holding an interest in the company, the company and its directors and officers are liable on summary conviction to a fine of $10,000.00 and imprisonment for 3 years and plus an additional fine of $300.00 for every day the offense continues.
It is a defense to such charge that the company relied upon declarations received from its shareholders in good faith, unless the company has reason to believe such declaration is false or misleading.
As seen below, shareholders and beneficial owners of shares are required to make declarations to the Company. Where such a declaration is made a Company is required to make a note in a register set for such purpose and file the prescribed form with the Registry within 30 days of receipt of the same. Failure to do so constitutes an offense by the company and every director and officer liable to the same stipulated penalty ($10,000.00 and imprisonment for 3 years and plus an additional fine of $300.00 for every day the offense continues).
Finally, section 337D mandates companies to file a declaration on the issue or transfer of shares within 30 days of the same under the same penalty for non-compliance.
Shareholder/Beneficial Owner obligations
Section 337C mandates all persons listed as shareholders of companies who are not the beneficial owners, within 30 days of the commencement of the Amendment, to declare to the company by the prescribed form, the identity of the beneficial owners and the capacity in which the shareholder holds the shares. It further mandates all persons who have beneficial ownership in a share(s) of a company to make a declaration of the same to the company within 30 days of being served a notice by the Company.
Upon the commencement of the Amendment, every person who acquires a beneficial interest in a share(s) of a company and whose name is not listed as a shareholder, within 30 days of acquiring such interest to submit a declaration in the prescribed form to the company specifying the nature of their interest, the date it was created, and the name of the listed shareholder.
Where, after the commencement of the Amendment, there is a change in the beneficial interest in the shares of a company both the beneficial owner and listed shareholder are required, within 30 days of such change, to declare the same to the company.
Any persons who do not, without reasonable excuse, make a declaration required under the section is guilty of an offense and on summary conviction liable to a fine of $10,000.00 and imprisonment for 3 years and plus an additional fine of $300.00 for every day the offense continues.
The Amendment also declares that no right of a beneficial holder in respect of the interest in shares will be enforceable by him or anyone claiming through him if not disclosed under the Amendment. The Amendment also does not alter the position regarding a shareholder’s right to dividends.
Where no shares have been issued
Many companies, particularly small ‘one-man’ companies or family-run businesses, are incorporated but no shares are ever formally issued. The Companies Act provides for such instance where no shares have actually been issued by deeming the incorporator as the shareholder for the provisions of the Act.
Further in the instance of a ‘one-man’ type of business where the incorporator is also a director and the main person with responsibility for the affairs of the company, as is usually the case, he will quite easily be the “beneficial” owner as defined by the Amendment.
Conclusion
The Amendment imposes serious penalties for non-compliance with the obligations in respect of beneficial ownership of shares. Companies are required to perform their duties and ascertain the beneficial ownership of their shareholding and shareholders make the necessary disclosures.
The Companies Registry of Trinidad and Tobago may be found here (https://www.legalaffairs.gov.tt/companies-registry).
Comments