Historical Perspective and Conceptual Understanding of Beneficial Interest/Ownership

Entities such as companies, trusts, foundations, partnerships, and other types of legal persons and arrangements conduct a wide variety of commercial activities. While they play an essential role in the economy, their unique legal structure also makes them amenable to be used in complex transactions designed to conceal the actual owner and reason for doing the particular transaction. These entities were being used (or misused) as a vehicle for various illicit purposes like money laundering, tax evasion, insider dealing, terrorist funding, etc.

In the wake of increased misuse of these entities as vehicles to attain illegal objectives, there was a growing need to address this concern globally. It was felt that misuse could be significantly contained if information regarding both the legal owner and the beneficial owner, the source of the entity’s assets, and its activities becomes available to the authorities in a timely manner. That necessity formally introduced the concept of identifying ultimate beneficial ownership.

In India, the regulators, in their commitment before global forums, have been tightening the rules pertaining to the identification of beneficial owners. This article covers an overview of beneficial ownership and intends to increase its awareness.