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Indirect Control in Corporate Structures: Uncovering Hidden Ownership
A recent report has highlighted the importance of identifying beneficial owners in complex corporate structures. This is particularly crucial in cases where ownership is obscured through a chain of corporate vehicles or indirect control. In such situations, it is essential that legal persons register accurate beneficial owner information, even if these individuals are far up in the corporate structure or not resident in the Sultanate.
18 Examples of Indirect Control
Figures 1-5 illustrate various scenarios where indirect control can exist:
- • Figure 1: A company with a complex ownership structure
- • Figure 2: A nominee shareholder arrangement
- • Figure 3: A family-owned business with multiple layers of control
- • Figure 4: A company controlled by a private equity firm
- • Figure 5: A joint venture with shared control
Calculating Ownership Percentage in Complex Structures
Figures 1 and 2 demonstrate how to calculate ownership percentage in complex structures:
- • Figure 1: A simple calculation example
- • Figure 2: A more complex calculation scenario
Identifying Beneficial Owners
When identifying beneficial owners, it is essential to consider not only formal ownership but also indirect control. This may involve analyzing contracts, understandings, relationships, and shareholder agreements.
Step 2: Identifying Beneficial Owners through Other Means
If no natural person is identified through ownership, a beneficial owner may be a natural person who controls the legal person by other means. These controls can include:
- • Shareholders exercising control alone or together
- • Contracts, understandings, relationships, and shareholder agreements
- • Exercise of dominant influence or power to appoint senior management
Step 3: Identifying Beneficial Owners through Control Positions
If no natural person is identified under Steps 1 or 2, the beneficial owner may be a natural person who:
- • Exercises significant authority or strategic decisions affecting the business
- • Has control over senior management of the legal person
- • Is responsible for daily/regularly practicing and directing the business
Examples of such controls include:
- • Personal connections to persons in positions of power
- • Participation in financing the enterprise
- • Close family relationships
- • Historical or contractual associations
- • Use, enjoyment, or benefit from assets owned by the legal person
Case Study: Family-Controlled Business
Figure 1 illustrates an example of indirect control through a family member:
In this scenario, Company X has a business in a high-risk industry and secured a company loan with personal guarantees from the father of one of its owners. Although the owner’s father is not a formal shareholder, he controls the legal person by providing credit guarantees for other companies he owns.
Conclusion
Identifying beneficial owners in complex corporate structures requires careful analysis and consideration of indirect control mechanisms. By registering accurate beneficial owner information, legal persons can ensure compliance with regulations and transparency in their business operations.