Beneficial ownership

Revealing who stands behind the companies

Disclosing beneficial owners

The identity of the real owners – the ‘beneficial owners’ – of the companies that have obtained rights to extract oil, gas and minerals is often unknown, hidden by a chain of unaccountable corporate entities. This problem affects other sectors and often helps to feed corruption and tax evasion. People who live in resource rich countries are at particular risk of losing out as extractive assets are too often misallocated for corrupt reasons.

The EITI's beneficial ownership requirements

  • By 2020, all implementing countries have to ensure that all oil, gas and mining companies that bid for, operate or invest in extractive projects in their countries disclose their real owners.

  • This should include the identity of the owner, i.e. the name, nationality and country of residence. Countries are also encouraged to ask companies to provide further details such as the date of birth, national identity number, residential address etc.

  • Any politically exposed persons holding ownership rights in oil, gas and mining projects must be identified.

  • The EITI recommends that beneficial ownership information is made available through public registers. At a minimum, the information must be included in the country’s EITI Report.

Requirement 2.5 of the EITI Standard (2016) covers beneficial ownership.

"Beneficial ownership information enables Nigerians to expose corruption and nepotism in the acquisition process. Besides asking companies to voluntarily disclose information on their ownership structure, including any politically exposed persons, going forward NEITI has also put into eeffect a mechanism that would enable it to capture ownership of divested wells, license holders, lease holders and companies bidding for extractive industry contracs. In short, beneficial ownership in the extractives sector in Nigeria begins to scratch where it itches."
Nigeria EITI Secretariat

The challenge with hidden ownership

Oil, gas and mining projects can yield great profits both to extractive companies and governments. In many cases such projects are run by responsible companies with the necessary technical and financial capacity. However, experience has unfortunately also shown that in many cases, in particular where governance is weak, rights to extract oil and minerals may be given to companies that do not have such competence. Rather, such companies may be given access to lucrative extractive projects because their owners are politically connected, or because their owners are willing to engage in questionable deals aimed at generating quick profits for a few rather than benefits for wider society. Suspicion or confirmed wrongdoing can lead to devaluation of other extractive assets, and deter overall investment in countries rich in natural resources. Anonymous companies makes it harder to curb money laundering and corruption as it enables wrongdoers to hide behind a chain of companies often registered in multiple jurisdictions. 

It has been estimated that developing countries lose USD 1 trillion each year as a result of corrupt or illegal deals, many of which involve anonymous companies. In 2013, the Africa Progress Panel suggested that the Democratic Republic of Congo (DRC) in the period 2010-2012 lost at least USD 1.36 billion from five mining deals hidden behind a structure of complex and secret company ownership. According to DRC’s EITI reports, this is about the same as the country’s average annual revenue from oil, gas and mining in the same time period. Disclosure of beneficial ownership will help lower the risk of financial misconduct.

The Panama Leak confirm that persons behind oil, gas and mineral extraction may well use shell companies to hide behind. Attention on closing down the possibilities for hiding money in places like Panama is welcome. But it will not alone put an end to financial secrecy facilitating tax dodging and corruption. It has to be matched with better rules and enforcement in countries where the money is generated in the first place, which is why EITI’s new ownership requirements are so important.

The benefits of beneficial ownership transparency are numerous. It can help improve the investment climate, reduce reputational and financial risks, prevent corruption and illicit financial flows, improve the rule of law, increase trust and accountability, and enhance revenue collection.

Progress with beneficial ownership in EITI countries

Beneficial ownership disclosure in EITI countries

Map shows the status as of May 2016.

In the last three years, the fight against secret company ownership has gained great momentum. The G8 and G20 have made transparency in beneficial ownership a key priority. The EU has required member states to establish registers. Several countries have passed national legislation and are working towards public registers. Yet, to date, there is relatively little beneficial ownership information out in the open. The EITI is one of few organisations that has delivered practical results through annual collection and publication of beneficial ownership information in EITI Reports, and through the beneficial ownership pilot conducted in 11 countries from 2013-2015.

View progress by country by following the link to the country page:

“Nigerian laws do not require companies to disclose beneficial ownership information. However beneficial ownership disclosure in Nigeria provides information on the ownership structure of Nigerian's common patrimony in the extractive industry: information of ownership of divested wells, licenses, leases, contract bidding companies, etc. Beneficial ownership disclosure enables Nigerians to expose corruption and nepotism in the process leading to the acquisition of such ownership".