Beneficial owners of a company client: individuals holding more than 25% (MLR 2017 reg 5)
Brightwater Interiors Ltd, an unlisted company, instructs Fenwick Adeyemi, an SRA-authorised firm in England, to act on its purchase of a warehouse. The company's shares and voting rights are held by four individuals: Helena Novak 30%, Marcus Obi 25%, Saoirse Kelly 25% and Daniel Price 20%. Each holds directly, and no one exercises control over the company's management in any other way.
Which individual or individuals are beneficial owners of the company under the Money Laundering Regulations 2017?
Choose one answer to see the reasoning.
Worked answer
Correct answer D: Helena only, because she alone holds more than 25% of the shares and voting rights.
THE RULE TO REMEMBER
For an unlisted company, a beneficial owner includes any individual who ultimately owns or controls more than 25% of its shares or voting rights (MLR 2017 reg 5(1)(b)).
Beneficial owners of a company client: individuals holding more than 25% (MLR 2017 reg 5)
Regulation 5(1) of the Money Laundering Regulations 2017 defines the beneficial owner of a body corporate (other than a listed company) as including any individual who ultimately owns or controls, directly or indirectly, more than 25% of the shares or voting rights, or who exercises ultimate control over its management or otherwise controls it. The threshold is 'more than 25%', not '25% or more'. Helena holds 30%, so she is a beneficial owner. Marcus and Saoirse hold exactly 25%, which is not more than 25%, and Daniel holds 20%. As no one controls the company in any other way, Helena is the only beneficial owner, and the firm's customer due diligence must identify her and take reasonable measures to verify her identity.
Why A is wrong: Only individuals meeting the reg 5 tests are beneficial owners; a 20% holding with no other control does not qualify.
Why B is wrong: The threshold is more than 25%; holding exactly 25% does not meet it.
Why C is wrong: A majority is not needed; any holding above 25% makes an individual a beneficial owner.
Why E is wrong: There is no rule requiring the smallest shareholder to be identified as a beneficial owner.
A little more practice done.
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