Beware the Amendment: Items to Watch for When Assessing Beneficial Ownership in Privately Held Companies

In certain jurisdictions shareholder information of private corporations is made public in registry filings. In other jurisdictions, such as the United Kingdom, beneficial ownership registries have been developed in response to efforts to expose the beneficial owner of corporate entities, trusts and other vehicles.

This standard certainly isn’t the case across the world and for organizations subject to due diligence requirements, one filing to particularly be mindful of is the amendment.

Most jurisdictions provide some sort of document list which identifies the historical filings for a corporation. Some jurisdictions provide similar information for organizations like societies and charities. The documents could be previous annual filings but they might also be amendments to the corporate information filed with the registry. Amendments might disclose a change of the corporation’s name or they might reflect the addition or removal of a director or officer.

In smaller corporations, the directors and officers are often the shareholders and an amendment that removes and replaces a director could be an indication that the true controlling minds of the company are placing nominees in the role of director or officer.

A corporate name change could also be of interest, particularly if the former name of the corporation is substantially similar to an entity known to be associated with a politically exposed person.

For example, your company of interest may currently have a name that doesn’t raise any flags; however, if the company used to be called XYZ Partnership 2, and you are aware that XYZ Partnership 1 is operated by a government official in that jurisdiction, that issue may deserve greater scrutiny.

Is the timing of an amendment of interest? That is context specific. Of course, where a significant corporate event has occurred and an amendment coincided with event, examining what information was changed is useful.

If it is available, it is also useful to examine the corporate profile report immediately prior to the amendment. The information disclosed could reveal names or addresses of interest.

For more information on enhanced due diligence techniques, visit our KeyNorth Risk Insights page, sign up for our newsletter or contact us.