Beneficial Ownership - 2017

BENEFICIAL OWNERSHIP REGISTER

Article 30 of the 4th EU Anti-Money Laundering Directive (4AMLD) requires all EU Member States to put into national law provisions around beneficial ownership information for corporate and legal entities.

There are two stages to this process:

1) As of 15 November 2016 corporate and legal entities must hold adequate, accurate and current information on their beneficial owner(s) in their own beneficial ownership register (see below)

2) Corporate and legal entities will in due course be required to file this information with a central beneficial ownership register. The central register is in the process of being established and further information on this is stated below.

BENEFICIAL OWNERSHIP REGISTER - INFORMATION TO BE HELD BY COMPANIES

The requirement for corporate and legal entities ("companies") to hold their own beneficial ownership register was transposed into Irish law by Statutory Instrument No 560 of 2016. The following is a summary of the information that companies are required to hold under Section 4 of the SI:

(1) the name, date of birth, nationality and residential addresses of each beneficial owner of it (the beneficial owner must be a natural person);
(2) a statement of the nature and extent of the interest held by each such beneficial owner;
(3) the date on which each natural person was entered into the register as a beneficial owner of it;
(4) the date on which each natural person who has ceased to be a beneficial owner of it ceased to be such an owner;
(5) if, having exhausted all possible means and provided there are no grounds for suspicion by the company, no natural persons are identified, or there is any doubt that the persons identified are the beneficial owners, there shall be entered in the register the names of the natural person(s) who hold the position of senior managing official(s) of the company (including their date of birth, nationality and residential addresses). In this case, a company shall keep records of the actions taken in order to identify the beneficial ownership of it.

This information is provided by the CRO for guidance only and is not a legal interpretation of the SI or the EU Directive. If in doubt a company should seek its own legal advice. Any queries can be sent to the following email address: aml@finance.gov.ie

Statutory instrument 560 of 2016 transposes the first sub-paragraph of Article 30(1) of the Fourth Anti-Money Laundering Directive (4AMLD).

Link to statutory instrument No. 560 of 2016 entitled ‘European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2016’. This statutory instrument requires corporate and other legal entities incorporated within this State to hold adequate, accurate and current information on their beneficial ownership, including details of the beneficial interests held. It has a commencement date of 15 November 2016.

BENEFICIAL OWNERSHIP  - CENTRAL REGISTER 

It is expected that the Department of Finance will make a Statutory Instrument(SI) in the coming months assigning separate legal responsibility to the Registrar of Companies for the establishment and maintenance of the Registrar of Beneficial Ownership of Companies and Industrial and Provident Societies (I&Ps).

In advance of the passing of this SI, the Registrar wishes to provide the following information to companies and I&Ps in relation to how the Register of Beneficial Ownership (RBO) is planned to operate:

1. The RBO is expected to be in place and ready to be populated in Q1, 2018.
2. There is likely to be a period of at least 3 months provided to file without being in breach of the statutory duty to file.
3. Filing will be done through an on-line portal, there are no plans for paper forms and there will be no filing fee.
4. The information to be filed with the RBO in respect of each beneficial owner (must be a natural person) will include the following:
- Forename & Surname
- Date of birth
- Nationality
- Residential address
- A statement of the nature of the interest held by each beneficial owner (eg controlling shareholder)
- A statement of the extent of the interest held by each beneficial owner (eg controller of 26% of shares in company)
- The date on which each natural person was entered in the register as a beneficial owner of the corporate entity
- The date on which each natural person who has ceased to be a beneficial owner of it, ceased to be such an owner
- If no natural persons are identified there shall be entered in the register the names of the natural person(s) who hold the position(s) of senior managing official(s) of the company.
5. Details of the presenter making the entry in the register on behalf of the company will also be required, ie name and contact details.

This information is provided by the Registrar of Companies in good faith in order to give companies and I&Ps advance notice of what is expected to be required of them in relation to filing data with the RBO. Until the SI is formally passed, this information is subject to change. As soon as the SI is passed, the Registrar of Beneficial Ownership of Companies and I&Ps will launch an information campaign providing more definite information to companies and I&Ps.

A Template of the data to be entered into the RBO is provided. SAMPLE INFORMATION TO BE FILED WITH THE BOR 31-1-17.pdf

DEFINITION OF BENEFICIAL OWNERSHIP IN ARTICLE 3(6) OF 4AMLD

Article 3(6): ‘beneficial owner’ means any natural person(s) who ultimately owns or controls the customer and/or the natural person(s) on whose behalf a transaction or activity is being conducted and includes at least:

(a) in the case of corporate entities:

(i) the natural person(s) who ultimately owns or controls a legal entity through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interest in that entity, including through bearer shareholdings, or through control via other means, other than a company listed on a regulated market that is subject to disclosure requirements consistent with Union law or subject to equivalent international standards which ensure adequate transparency of ownership information.

A shareholding of 25 % plus one share or an ownership interest of more than 25 % in the customer held by a natural person shall be an indication of direct ownership. A shareholding of 25 % plus one share or an ownership interest of more than 25 % in the customer held by a corporate entity, which is under the control of a natural person(s), or by multiple corporate entities, which are under the control of the same natural person(s), shall be an indication of indirect ownership. This applies without prejudice to the right of Member States to decide that a lower percentage may be an indication of ownership or control. Control through other means may be determined, inter alia, in accordance with the criteria in Article 22(1) to (5) of Directive 2013/34/EU of the European Parliament and of the Council (3);

(ii) if, after having exhausted all possible means and provided there are no grounds for suspicion, no person under point (i) is identified, or if there is any doubt that the person(s) identified are the beneficial owner(s), the natural person(s) who hold the position of senior managing official(s), the obliged entities shall keep records of the actions taken in order to identify the beneficial ownership under point (i) and this point;

Overview of new regulation on beneficial ownership

Background
The first sub-paragraph of Article 30(1) of 4AMLD requires corporate and other legal entities incorporated within the State to hold adequate, accurate and current information on their beneficial ownership. It reads as follows:

“Member States shall ensure that corporate and other legal entities incorporated within their territory are required to obtain and hold adequate, accurate and current information on their beneficial ownership, including the details of the beneficial interests held”

The purpose of this provision is to enable the determination of the natural persons who are the real owners/controllers of a company. In many cases, this is clear as the legal owners and beneficial owners are one and the same. In other cases, the ownership may be so dilute that it is not possible to identify a particular beneficial owner. It is appreciated that there are many complex company ownership structures in place where determining who the underlying beneficial owners are will not be a simple task.

However, notwithstanding challenges which will undoubtedly arise, there should be no ambiguity that a core objective of this EU Directive is to establish mechanisms to assist designated persons such as banks to conduct CDD in relation to legal entitles and as part of that work, to require companies to identify natural person controlling them, even if doing so necessitates in-depth legal analysis of their ownership structures.

In summary, therefore, there is a requirement for companies to identify the natural person/s who are their underlying beneficial owners on the basis of the definition in Article 3(6) (a) of the 4AMLD (see appendix).

Main features of new regulation
The following should be noted in relation to the regulation:

(i) The regulation applies to every corporate or other legal entity except for those:

(a) Listed on a regulated market that is subject to disclosure requirements consistent with the law of the EU, or

(b) Subject to equivalent international standards which ensure adequate transparency of ownership information.

This exemption from scope is contained in the last three lines of the first paragraph Article 3(6) (a) (i) of the 4AMLD and only applies to companies listed on a regulated market.

(ii) In the regulations, ‘beneficial owner’ is given the meaning provided by Article 3(6) (a) of the 4AMLD, which sets out how beneficial ownership should be determined, so as to identify the natural person or persons ultimately controlling a legal entity through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interest in that entity. A shareholding of 25 % plus one share or an ownership interest of more than 25 % in the customer held by a natural person shall be an indication of direct ownership. A shareholding of 25 % plus one share or an ownership interest of more than 25 % in the customer held by a corporate entity, which is under the control of a natural person(s), or by multiple corporate entities, which are under the control of the same natural person(s), shall be an indication of indirect ownership (see appendix for full text of Article 3(6)(a)(i))

(iii) The regulations require every corporate or other legal entity to take all reasonable steps to obtain and hold adequate, accurate and current information in respect of its beneficial owners, e.g. name, d.o.b., address, statement of nature and extent of interest held by each beneficial owner and to maintain within the entity’s records a register of that information.

(iv) The regulations provide for a scenario where all avenues for determining the beneficial owner have been exhausted to no avail and in such a case, the names of the senior managing officials of entity will be added to the register.

(v) The regulations allow a corporate entity, where it does not already have details of its beneficial owner, to give notice to any natural person whom it believes to be its beneficial owner; once such a notice has issued, the natural person assumed to be a beneficial owner will have a month to reply.

(vi) The regulations allow a corporate entity to issue a similar notice to a person whom it has reasonable cause to believe knows who its beneficial owner or owners are. There is however a safeguard in respect of such 3rd party notices which will permit non-disclosure of information where any claim to legal professional privilege could be maintained in legal proceedings.

(vii) The regulations provide for mechanisms to keep corporate entities’ registers up to date, including notifications and communications concerning relevant changes in beneficial ownership between corporate entities and their beneficial owners;

(viii) A duty is also imposed upon a natural person who is a beneficial owner or who ought to know that they are one to notify an entity that they are a beneficial owner if they have not received a notice from the entity requesting this information. There is also a duty on natural persons, in certain circumstances to notify relevant changes in beneficial ownership