25 February 2022

In most cases, real owners (beneficial owners) make it practically impossible to tell who is truly running and profiting from a company. This allows these real persons to abuse their tax responsibilities, launder money, get around international sanctions, break monopoly laws and funnel anonymous money into political processes. That challenge of anonymous owners gave birth to beneficial ownership registers. ^[1]

“When the Tax Justice Network first called for beneficial ownership registration in 2005, the idea was considered to be too difficult and costly to implement. But, in the past few years, governments have rapidly begun to embrace beneficial ownership registration” Tax Justice Network (TJNA)^[2]

Some civil society organisations have been and continue to scale up advocacy on public disclosure of the Beneficial Ownership (BO) to promote transparency and accountability. The Zimbabwe Environmental Law Association (ZELA) in collaboration TJNA and Stop the Bleeding (STB) dedicated the second day of the workshop to explore emerging issues on beneficial ownership.^[3] 

Why is BO information relevant?

Knowing the real natural persons-beneficial owners of companies root out malignant corruption and Illicit Financial Flows (IFFs) that are eroding government revenue which lead to poor service delivery and stunted social and economic development,

“Lack of beneficial ownership information enables anonymity thus enabling tax evasion, corruption, money laundering and financing of terrorism” Francis Kairu (TJNA)

Why is the BO registry important?

In setting the tone Mr Dakarayi Matanga from Transparency International Zimbabwe (TIZ) explained BO and corporate accountability (CA) linking it to tax incentives, government and international laws that control owners of business entities.  He also spoke about the social, political and economic impacts of tax incentives especially to those whose beneficial owners are not publicly known.

“Some business entities now share power with the state, their ownership is so complicated, some have more financial power than that of the state…”  Dakarayi Matanga, TIZ

He welcomed and appreciated the beneficial ownership registry in the new Companies and Other Business Entities Act [Chapter 24:31 which we shall refer to as “the new Act” in this article]. However, there were concerns on limited access to the BO register, as CSOs need permission from the owner or court order, which suppress efforts of those fighting corruption, undermining public transparency and accountability. Public access to the BO register allows the CSOs and other stakeholders to hold to account beneficial owners. It also makes sure that all members of society are equal before the law.

“By reprogramming our tax systems to hold all beneficial owners to the same degree of transparency as everybody else, beneficial ownership laws reject the desires of some of the wealthiest individuals to be beyond the reach of the law”  TJN^[4]

The discussion also saw the Deputy Chief Registrar of Companies, Mr Willie Mushayi unpacking the current state of BO registration and access to information. He indicated that in complying with Financial Action Task Force (FATF) and Money Laundering and Proceeds of Crime Act [Chapter 9:24] , Zimbabwe now have BO register.^[5]  The Registrar of Companies is putting tremendous effort to make the new act usable.

According to the new act, “beneficial owner” in relation to a company means a natural person who ultimately owns or controls the rights to or benefits from property or a person who exercises ultimate effective control over a legal person. The threshold is currently at 20% of the company’s shares or voting rights.

This BO information must be disclosed by both public and private limited companies and there are civil penalties for non-compliance. The Registrar of Companies is in the process of computerizing and is expected to go live in April 2022.  He highlighted that there is a growing demand for Beneficial Register from banks that are giving loans to companies, a situation that shows that BO register access is important in enhancing investment and access to finance in the country.

During the discussion it was noted that some of the reasons for hiding ownership were to keep the identity unknown in the interim as a business strategy, to circumvent possible refusal of registration of acquisition due to some prejudice and to carry out illegal activities

“In the interest of the nation, BO register prevent abuse of legal persons from facilitating money laundering or terrorist financing, expose conflict of interest and also supports anti-corruption efforts…BO sub-committee under the National Task Force develops the legal framework to collect, timely update and verify the accuracy of BO information and Conduct Outreach for all relevant stakeholders…” Mr Willie Mushayi, Deputy Chief Registrar of Companies.

According to Mr Mushayi, 80% of registered companies are family companies and most women are silent shareholders.  CSO and faith-based organizations were encouraged to raise awareness, teaching women to know their rights as shareholders. CSO committed to work with Registrar of companies to conduct outreaches for all stakeholders and raise awareness on BO. Participants raise concerns on lack of legislation to deal with trust which are now reading in tax evasion and other illegal dealings. There was a proposal to advocate for public access to the BO register or at make it easier for stakeholders like CSOs who may need it for public interest.  In the broader scheme of things, the best practice is to allow public access to the beneficial ownership register. Other African countries such as Zambia have embraced public access to beneficial register courtesy of the Extractive Industries Transparency Initiative (EITI). The Zimbabwe Environmental Law Association (ZELA) and other CSOs present strongly felt that to improve parliament’s oversight role on fighting corruption, the beneficial ownership disclosure should include parliament among the list of government institutions that can access the beneficial ownership registry without going to court.

Francis Kairu from TJNA brought the regional experience to the conversation and simplified some of the technical terms regarding BO transparency through case studies and practice sessions on mapping corporate ownership. During the session participants were taught how to distinguish legal owners from BO, identify fixers, natural persons and significant influence.  He noted that Zimbabwe had no regulatory body and legislation on trust and foundations and was of the view that they must be included in the new act and BO requirements or introduce a separate act for them. Loopholes of existing laws and complicated ownership structures/layers are being used to steal from the state. CSOs and participants were encouraged to use information and knowledge they had gained to go and capacitate others. “Don’t keep the knowledge, pass it on, “he advised.

The day ended with participants making commitments and declarations. Some of the commitments made include building partnerships between CSOs or with other stakeholders to raise awareness, employ tax campaigns and draft BO and tax incentive modules for use in awareness raising. Commitments by parliament include engaging the registrar’s office to understand their role, identify and capacitate champions within parliamentarians and parliament secretariat to raise BO issues in parliament and push for their incorporation into the parliament’s strategy for 2023. The media committed to partner and report on issues to do with BOs and tax incentives.  ZELA looks forward to the implementation of these action plans.

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[1] https://taxjustice.net/topics/beneficial-ownership/

[2] ibid

[3] Including BO legislation, gold standards on BO, the impact of global leaks like the pandora papers, and how BO affects tax justice at country, regional and global levels

[4] https://taxjustice.net/topics/beneficial-mownership/ 

[5] In terms of section 72 of the Companies and Other Business Entities (COBE) Act all companies are required to keep a register of beneficial owners