The recent Court of Justice of the European Union (“CJEU”) judgment may have consequences for the ongoing viability of a number of public registers containing the personal details of the ‘beneficial owners‘ of companies, including the United Kingdom register of overseas entities holding UK land (“ROE Register”) and register of beneficial ownership of UK companies and partnerships (“PSC Register”).

The CJEU was clear that “the general public’s access to information on beneficial ownership constitutes a serious interference with the fundamental rights to respect for private life and to the protection of personal data, enshrined in Articles 7 and 8 of the Charter [of Fundamental Rights of the European Union (the “Charter”)].”Consequently, several European public registers, established pursuant to Article 30 of the EU’s Fourth Anti-Money Laundering Directive, have been suspended.

Article 7 of the Charter is directly replicated in Article 8 of Schedule 1 of the UK Human Rights Act 1998 and Article 8 of the Charter is implemented by the General Data Protection Regulation (“GDPR”), which forms part of UK law pursuant to the UK Data Protection Act 2018. As such, although decisions of the CJEU are no longer binding upon the UK Courts, the judgment is highly persuasive in the interpretation of UK law as it applies to the ROE Register and PSC Register and may form the basis of a challenge to the ongoing public disclosure of beneficial ownership.

A similar position exists in the Isle of Man and the other British Offshore Islands regarding the inclusion of rights set out in the Charter and the GDPR into local law. As such, the CJEU’s decision calls into question the feasibility of the joint commitment of each of these jurisdictions to deliver a public register of company beneficial ownership.

The PSC Register

The implementation of the UK’s public registers has not been without challenges. The PSC Register’s factual accuracy is doubtful given the lack of verification by Companies House. While several press investigations have revealed consistent failings in this regard since the register’s introduction in 2016, there seems limited appetite to enforce the criminal penalties for the submission of inaccurate filings.

Despite the PSC Register, abuse of corporate structures continues in the UK. Recent reports show 728,000 firms have been set up on Companies House — an average of 2,200 every day. ‘Burner companies’ – fake firms that are set up using the addresses and sometimes the names of innocent people – remain rife as does their use in fraud and money laundering. An estimated 15% of all UK company registrations may be fake.

The rules surrounding the ROE Register have attempted to avoid the flaws in the PSC regime by both requiring information to be verified by a person located in the UK (and registered and supervised under the UK’s anti money laundering regulations) and introducing clear consequences for inaccurate verification and non-registration. However, perhaps due to confusion regarding the verification regime, implementation is slow and initial compliance limited. Land Registry data suggests that there are 31,506 overseas companies (owing 93,877 relevant UK properties) which need to be added to the ROE Register by the end of January 2023 in order for those properties to be transacted. As at the end of November 2023, just over 5,000 of those overseas companies have registered.

Do public registers provide transparency?

The CJEU’s judgment adds to these problems with an existential question: do public registers provide transparency at the cost of privacy, a fundamental human right? Is it possible to limit the abuse of corporate personality and its veil of secrecy whilst preserving an individual’s privacy?

It is a political truism in major economies that companies, predominantly those incorporated ‘offshore’, are utilised by their shadowy beneficial owners, obscured by a web of trusts, nominees and multiple jurisdictions, for a number of criminal purposes, ranging from tax evasion to money laundering and fraud.

The resulting political pressure upon jurisdictions such as the Isle of Man over the last 20 years has resulted in a wide number of legal and regulatory developments in the British Offshore Islands. Most are a consequence of co-operation with international initiatives and bodies, including the OECD, FATF and MONEYVAL.

These regulatory changes are fundamental, peer reviewed and often world leading: the licencing of those establishing and administering companies and trusts as a business, including a robust inspection, investigation and enforcement regime by the primary financial services regulator; tough anti-money laundering regulation; and the verified central registration of the beneficial ownership of companies (on a non-public basis), linked with an international network permitting disclosure in connection with criminal and tax investigations.

To date, public registers of beneficial ownership have been resisted by these jurisdictions, largely due to the same privacy fears identified by the CJEU. In the words of CJEU the aim of the EU in requiring public registers has been “to prevent money laundering and terrorist financing by creating, by means of increased transparency, an environment less likely to be used for those purposes.” In essence the implication is that secrecy is the only problem and that the public and press are best placed to police and control the abuse of the system.

However, often the licensing of those looking to profit from the establishment of companies or similar structures for third parties provides a much more targeted solution. A regulator, subject to confidentiality and with the support of criminal penalties, is able to investigate, and ensure compliance with a full system of regulation and anti-money laundering rules and inspect and identify beneficial owners and their source of wealth.

Both the EU and the UK may wish to consider if the systems that have developed organically in the British Offshore Islands provide an answer to the decision of the CJEU. They certainly provide a fundamental regulatory means of mitigating the abuse of corporate structures without infringing personal privacy. Given large parts of the Government’s recently introduced Economic Crime and Corporate Transparency Bill assume the existence and reform of the existing public registers, does the CJEU decision at the very least necessitate an urgent rethink of this legislation?

A consultation upon the regulation of those incorporating companies wholesale in or from the UK is long overdue. It may even provide an opportunity for the UK to carve out a service-based market for itself at a time when economic growth is much needed.

If you wish to discuss any issues relating to regulatory laws and the privacy registers in the United Kingdom and/or the Isle of Man please contact Geoff Kermeen.

For further information please contact:

This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.