As of December legal entities must register their beneficial owners
On December 1, 2017 amendments to the Law On the Prevention of Money Laundering and Terrorism Financing shall come into force obliging the legal entities to register their beneficial owners in the public registries. The purpose of these amendments is to create a public data base containing data of beneficial owners of all legal entities. This data base will be available as of April 1, 2018 and will be available online to everyone for a fee.
Who are beneficial owners of legal entities?
In relation to legal entities a beneficial owner is a natural person who owns or directly or indirectly controls at least 25% of the legal entity’s fixed capital or the amount of voting shares, or who controls the legal entity directly or indirectly. Beneficial owner may be the owner of the legal entity or a person who controls the legal entity or on whose behalf or for whose benefit and interest business relations are established or occasional transaction is performed.
Therefore, in relation to capital companies a benefical owner may be participants or shareholders (direct control) or other natural persons who exercise their rights through other natural or legal entity (indirect control). If such a natural person controls more than 25% of the legal entity, it shall be considered a beneficial owner, and the legal entity is obliged to register information regarding this person with the commercial register or other register, wherein the respective legal entity is registered.
When should beneficial owners of a legal entity be registered?
Legal entities registered by December 1, 2017 will have to register their beneficial owners with the Enterprise Register until March 1, 2018.
If a company will have a need to register changes in the composition of its shareholders or board, it will have to be done sooner along with registration of the respective changes in the commercial register.
It should also be noted that as of December 1, 2017 when establishing or forming new legal entities information about beneficial owners will have to be submitted right away upon submission of registration application.
If after registration of beneficial owners any changes will take place in their list, the legal entity will have to notify the Enterprise Register about it within the period of 14 days.
Who is allowed not to register beneficial owners?
There are certain exceptions when legal entity is allowed not to provide information about beneficial owners. Legal entity is released from this duty if it has already provided such information about its beneficial owner to the Enterprise Register within the framework of obligations stipulated by other regulatory enactments.
Legal entity may also not provide information about beneficial owners if its beneficial owner is a shareholder in such a joint stock company, the shares of which are included in the regulated market, and the type of control implemented over the legal person arises only from the status of the shareholder.
What will be the consequences if the legal person will not register its beneficial owners?
If in its application of registration or application regarding change of board or shareholders, the legal entity will not indicate its beneficial owners, the Enterprise Register will refuse the making of an entry in the particular register.
It should also be noted that if the legal person will not have registered information on beneficial owners, or if registered information will be false or not updated, the legal person will encounter problems when performing transactions with mediation of credit institutions, sworn notaries, sworn auditors and providers of legal services.
When registering beneficial owners, the legal persons will not have to submit to the Enterprise Register documents supporting that the respective natural person has this status in the legal entity. However, if the Enterprise Register will receive information that the legal person has provided false information about its beneficial owners, it will inform law enforcement authorities about possible case of criminal offence provided for in Section 272 of the Criminal Law, providing false information to the state authority.
Mentioned amendments to the Law On the Prevention of Money Laundering and Terrorism Financing will apply to almost all legal entities. On one hand, it will be an additional beaurocratic burden; however, on the other hand, in several cases it will be linked to disclosure of such information that has not been publicated this far on purpose. Law office “Rasa & Esenvalds” has an immense experience in providing legal assistance on matters of commercial law and the office may provide advice in order to determine which persons should be acknowledged as beneficial owners of the legal entity, and assist with registration in the registries of the Enterprise Register.