Every company must keep records of its UBO
Except for public authorities and certain associations, all legal entities must identify their ultimate beneficial owners.
An ultimate beneficial owner (“UBO”) means, put simply, every natural person effectively holding or controlling a company, regardless whether directly or indirectly. The law mentions the following examples of such effective holding or controlling:
- Exercising at least 25% of voting rights or holding such shares,
- Decision making rights with regard to company managers, directors, etc.,
- 25% profit share rights, or
- Other exercise of control over the legal entity.
Legal entities must keep records of their UBOs in paper or alternatively electronic form. The records must be ongoingly updated.
Companies must identify the following information about their UBOs': first name, surname, birth number (if exists), birth date, address of permanent residency or other address, citizenship, type and number of an identification document.
The law specifies that the records must include data showing the standing of the UBO and data proving that standing. We are of the opinion that the data should include the corporate structure up to the UBO and relevant documentation (e.g. Articles of Association and other corporate documentation) based on which such structure can be verified.
Company must keep records about the UBO for the entire duration of the UBOs control and for five years thereafter.
Every legal entity must submit the abovementioned data to the competent authority upon request. Any company not compliant with any of the duties under the law is subject to a fine up to €200,000.
Companies registered with the Registry of Partners of the Public Sector do not have the duty to keep records under this law. Nevertheless, they are obliged to submit data to competent authorities upon request.
If there is no natural person fulfilling the above legal criteria, i.e. the legal entity's UBO cannot be determined, a legal fiction applies based on which the managing director(s), proxy holder(s) and employees reporting directly to either of them are deemed to be UBOs of such legal entity. We are of the opinion that companies must maintain records supporting that conclusion.
By the end of 2019 all companies will have to register their UBOs with the Companies Register.
In our experience, the identification procedure of the UBO in some corporations is highly complicated and sometimes almost impossible. The liability for compliance with the law lies with each companies' managers. Exactly how responsibility will be apportioned in the event of an imposed fine is subject to future rulings.