Beneficial owners
A “beneficial owner” includes any individual who, directly or indirectly, exercises substantial control over a reporting company. An individual exercises “substantial control” over a reporting company if the individual meets any of four general criteria:
- The individual is a senior officer
- The individual has authority to appoint or remove certain officers or a majority of directors of the reporting company
- The individual is an important decision-maker
- The individual has any other form of substantial control over the reporting company
No ownership interest in the reporting company is required. There is also no limit on the number of individuals who may be treated as exercising substantial control over a reporting company. An Individual can exercise substantial control, directly or indirectly, over a reporting company, including through contracts, arrangements, understandings, intermediary entities or other relationships.
A “beneficial owner” also includes any individual who, directly or indirectly, owns or controls at least 25% of the ownership interests of a reporting company. A reporting company may have multiple types of ownership interests. Examples of ownership interests include equity, stock, or voting rights, a capital or profit interest, convertible instruments, options or other non-binding privileges to buy or sell any of the foregoing, and any other instrument, contract, or mechanism used to establish ownership.
Due to the complexity and expansiveness of the relevant definitions and terms, many companies will require legal advice and guidance in determining their beneficial owners, particularly in the case of organizations with complicated capital or governance structures or where interests are held indirectly through one or more tiers of entities or through trusts.
