Who is a beneficial owner

The test

A beneficial owner is a natural person. A company, a trust or a fund can hold shares, but the question is always who stands at the end of the chain. The test has three steps, applied in order:

1. Ownership. Anyone who holds, directly or indirectly, enough of the shares, the voting rights or the right to profits. In the EU today that is more than 25%; under the EU AML Regulation, which applies from 10 July 2027, it is 25% or more. Some jurisdictions set a lower line — the British Virgin Islands and Seychelles use 10%.
2. Control by other means. Anyone who controls the entity whatever their share: through a majority of the votes, the right to appoint or remove most of the board, a veto, a shareholders’ or voting agreement, a family relationship or a nominee arrangement.
3. Senior managing officials. Only when no one qualifies under the first two steps, and there is nothing suspicious about that, are the people who run the entity day to day recorded instead.

Working through the layers

How a holding through other companies is counted is changing. Under the EU directives in force today, a company’s holding of more than 25% counts towards a person who controls that company. Under the EU AML Regulation, from 10 July 2027, shares are multiplied along each chain and added across chains, and control at any level counts as well. The table under the chart shows both: each person’s multiplied interest, and whether they control a direct shareholder.

In the chart above, the co-investor holds 40% of the holding company through a nominee, and the holding company holds 70% of the operating company: 40% × 70% = 28%. From July 2027 that makes the co-investor a beneficial owner of the operating company by ownership. Under today’s rule it does not by itself, because the co-investor does not control the holding company — the trust does, with 60% — so the question becomes whether the co-investor has control by other means. Under either rule the nominee is not a beneficial owner: a nominee is looked through to the person it acts for.

Control at one level counts under both rules. A person who holds 60% of a company that holds 40% of another has 24% by multiplication, below the line, but controls a direct shareholder, and that makes them a beneficial owner. From July 2027, two chains that are each below the line can also add up to more than it.

Trusts and foundations

A trust has no percentage test. Every settlor, trustee, protector and beneficiary — or the class of beneficiaries, while individuals are not yet named — and anyone else with ultimate control is a beneficial owner of the trust and of every entity the trust owns or controls. In the chart, the founder who settled the trust and the daughter who benefits from it are beneficial owners of the operating company although neither holds a share. Where a trustee or protector is itself a company, the people behind it are added. A foundation is treated the same way: its founders, its council and its beneficiaries.

Registers and who can see them

Most jurisdictions now keep a central register of beneficial owners, filled in by the entity or its registered agent. In November 2022 the EU Court of Justice held that opening company registers to the general public breached the rights to privacy and data protection. EU registers now open to authorities, to banks and other obliged entities for due diligence, and to people who show a legitimate interest in fighting money laundering, such as journalists and civil-society organisations. Outside the EU the picture varies, from the United Kingdom’s public register to registers seen only by authorities.

What a bank expects

A bank or auditor asks for the same answer every register holds: a chart down to the natural persons, evidence for each layer (registers of members, trust deed, nominee declarations), identity and address for each beneficial owner, and an account of where their money came from. When the chart, the registers and the documents tell one story, the questions stop.