Nominee shareholdings are possible in relation to public limited companies only in Iceland. The Act on Public Limited Companies provides for the name, identity number and address of the person authorized to act as nominee shareholder, in accordance with the Act Securities Transaction, to be entered in the share register of the company. The Icelandic authorities confirmed that nominee shareholdings in public limited companies are only permissible under the conditions stipulated in the Act on Securities Transaction.
The Act on Securities Transactions
The Act on Securities Transactions provides that only licensed entities are permitted to act as nominee holders of shares that are negotiable on the capital market. The provisions governing such licensing are set out under the Act on Securities Transaction and the Regulation on Nominee Registration and the Custody of Financial Instruments in Nominee Accounts. The Regulation provides that financial undertaking (such as bank, securities undertaking, securities brokerage, etc.) which are authorized to hold financial instruments for their Icelandic or foreign clients may apply to the FSA ( Financial Supervisory Authority) for a license to hold the instruments in a nominee account. Section 12 of the Act states that nominees must keep a record of their clients, and this requirement is expanded upon by the
Regulations which provide that:
- Licensed nominee must have information available on clients who have requested nominee registration. Such information must be retained for five years from the end of the business relationship
- Licensed nominees must maintain a record of the share of each individual client which shall include the names and number of clients associated with the financial instrument registered in the nominee account, as well as the number of financial instrument covered by each nominee registration agreement
The above obligations are further supplemented by CDD ( customer due diligence) requirements under the AML (Anti-Money Laundering ) legislation. All persons who provide nominee shareholding services in the course of their business (i.e. professional nominees) are subject to the CDD requirements under the AML legislation, as a result of their status as „company service provider” and/or „financial undertaking”. All nominees fall within the scope of the AML legislation and must obtain and retain satisfactory identification information on their clients for whom they hold the shares. In addition, where their client is a legal entity, the professional nominee is also required as part of its CDD obligations to identify any „beneficial owner: of their client who is entitled to 25% or more of the shareholding or voting rights in the entity. Accordingly, the Icelandic financial and AML legislation ensures that identity information is available in the context of nominee shareholdings in Iceland.
Who can be Nominated?
Due to the fact that a number of countries in the South Pacific region are either offshore finance centers or tax havens or both, nominee shareholding, especially in trust companies, is increasingly becoming a feature of the company laws in these jurisdictions.
Nominee shareholding is a system of covering up the actual or beneficial owners of shares by an arrangement that allows the shares to be registered in the name of a nominee. A nominee may be an individual or a company. In a private company, it is easy to identify the beneficial owner, while it is rather difficult in public companies.
In cases of nominee shareholdings, a variety of important questions are often raised by tax regulations or other authorities because of the complexities of the arrangement and the secrecy in which they are often shrouded.
- Ahmadu M.(e.)(2017), Commercial Law and Practice in the South Pacific, Taylor & Francis, New York
- Frederikslust R.(e)(2007),Corporate Governance and Corporate Finance: A European Perspective, Routledge, New York
- OECD (2013), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: The Seychelles 2013 Phase 2: Implementation of the Standard in Practice: Phase 2: Implementation of the Standard in Practice, OECD Publishing, Seychelles
- OECD (2013),p.36
- Frederikslust R.(e)(2007)
- Ahmadu M.(e.)(2017)
Author: Andżelika Kędzior