13 Apr, 2011, 12.39AM IST, Deepshikha Sikarwar,ET Bureau

http://economictimes.indiatimes.com/news/politics/nation/black-money-govt-may-amend-companies-act-to-establish-ownership-of-assets/articleshow/7967371.cms

NEW DELHI: The government is considering sweeping changes in the Companies Act and other laws to identify the 'beneficial ownership' of assets, including companies, as opposed to legal owners, to counter the menace of black money and money laundering.

An inter-ministerial committee set up by the finance ministry has suggested company officials and auditors may be made liable to disclose the true identity of those exercising control over assets such as companies.

"The proposals are at an advanced stage of consideration," a government official said.

The concept of 'beneficial owner' appears in many other laws, including the Sebi Act, but is not clearly defined. This allows individuals and companies to hide behind complicated ownership structures.

The probe into the 2G telecom spectrum scandal has exposed the chinks in the current law, with investigators struggling to find the ultimate beneficiaries of telecom licences issued in 2008.

The urgency on this count has also arisen because of the obligations arising from India's membership of the Financial Action Task Force, or FATF.

The inter-ministerial panel has suggested the Companies Act clearly define 'beneficial owner' and include 'natural persons' with a controlling interest and 'natural persons' who comprise the mind and management of a company.

"Indian laws, including tax laws, treat registered owners as the real owner and there is no definition of an economic or beneficial owner," says KR Sekar, partner at auditing firm Deloitte, Haskins & Sells.

The proposed changes in the law are aimed at ensuring the real owners are identified.

The committee has suggested amendments to the Companies Act to put an explicit obligation on companies to obtain, verify and retain records of beneficial ownership and control of legal persons.

Companies will have to report such ownership and changes, if any, to registrar of companies every year and the statutory

auditors may be made responsible for verification of such information.

"The issue of lack of transparency of ultimate ownership and control is not just an operational risk/threat where the real owner is trying to obtain undue advantage but merits a serious consideration from the security point of view," said Navita Srikant, an anti-moneylaundering expert.