Why family offices aren’t phased by UK’s offshore transparency efforts

The overseas territory of the British Virgin Islands could be hit hard by the new UK legislation (photo: pixabay)

Legislation to force British offshore territories to disclose beneficial ownership of companies is not worrying family offices, say experts. Instead, the move will just upset jurisdictions affected because wealthy individuals and family offices take their business elsewhere.

“If and when these beneficial registers do come into effect groups like family offices will move to other offshore centres with no registers,” says a partner in a UK law firm. “There will be a mass exodus of people (from British overseas territories) who want to keep their affairs private.”

Family offices often use offshore centres for privacy reasons, but also to structure acquisitions using special purpose vehicles and other structured finance vehicles.

Under the legislation, Britain’s overseas territories will have to make public the real owners of all their registered companies by the end of 2020. But the lawyer reckons the legislation faces challenges, not least from the governments like the British Virgin Islands that are most affected by the new laws. “At the moment it’s a ‘wait and see’ situation. It’s still not entirely clear how the situation will develop,” he says.

You will always be able to set up a limited liability company in a jurisdiction without a public register

Keith Johnston, chief executive of the UK-based membership group Family Office Council, says the legislation could lead to a constitutional crisis between British overseas territories and the UK government. “The legislation has the potential to have a significant negative impact on the economies of the overseas territories and will put pressure on the Channel Islands and Isle of Man,” he says. “It may even precipitate a constitutional crisis with the overseas territories.”

Johnston and the law partner both agree that whatever the outcome, family offices with an offshore presence won’t be phased by the UK move. “There can’t be a global movement towards this (beneficial registers) because you aren’t going to see the likes of Malta, Luxembourg and all of the non-British offshore centres do the same thing,” says the lawyer, who often advises family offices on setting up offshore structures. “You will always be able to set up a limited liability company in a jurisdiction without a public register.”

He adds: “Family offices will ask themselves, do I want to be in a jurisdiction where I want to make my business affairs all public, or do I want to be in a jurisdiction where I don’t. There are almost no circumstances in which you could see that people would opt for publicity.”

Johnston says the so-called Common Report Standard, developed by the Organisation for Economic Co-operation and Development, and designed to combat tax evasion, enforces transparency in offshore centres anyway.

“Global transparency is being achieved through the Common Reporting Standard, which has the advantage of being universal and cannot be circumvented,” he says. “It is not going to be achieved by a small number of registers in certain jurisdictions, but not others, which will only serve the purpose of moving structures around the globe to protect legitimate privacy.”


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