On 29 April 2015, the Council of the European Union, which represents the governments of the 28 EU member states, endorsed a package of proposals aimed at preventing money laundering and terrorist financing. The package requires that EU governments establish and maintain central registries containing information about the beneficial owners of companies registered in their jurisdictions.
What Is A “Beneficial Owner?”
In the case of corporate entities, the draft directive defines a beneficial owner as 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.
A shareholding of 25% plus one share is sufficient to indicate direct ownership of a company under the proposal. Similarly, a shareholding of 25% plus one share 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), is an indication of indirect ownership.
As for trusts, the central registration of beneficial ownership information will be used where the ownership of a trust has “tax consequences.”
Companies listed on a regulated market are already subject to disclosure requirements under EU law so fall outside the scope of the draft directive.
Access To Beneficial Ownership Information
Under the draft directive, it would be at the discretion of member states as to whether such information would be publicised. As a minimum, member states are required to ensure that in all cases beneficial ownership information is made available to competent authorities and financial intelligence units (FIUs). Member states must also ensure that other persons who are able to demonstrate a “legitimate interest” with respect to money laundering, terrorist financing, and the associated predicate offences such as corruption, tax crimes and fraud, are granted access to beneficial ownership information, in accordance with data protection rules.
“Obliged entities” will also be permitted to view beneficial ownership information as part of their due diligence procedures. For the purposes of the draft directive, “obliged entities” include: credit institutions; financial institutions; auditors, external accountants and tax advisors; notaries and other independent legal professionals; trust or company service providers; estate agents; providers of gambling services; and other persons trading in goods to the extent that payments are made or received in cash in an amount of €10,000 or more.
What Information Will Be Held?
Any person or organisation that can demonstrate a legitimate interest will be able to access at least the name, the month and year of birth, the nationality and the country of residence of the beneficial owner as well as the nature and extent of the beneficial interest held.
The directive permits member states to prevent obliged entities and others with a legitimate interest (but not FIUs and competent authorities) from accessing information held on the beneficial ownership registry on a case-by case basis in exceptional circumstances. Such circumstances include where access would expose the beneficial owner to the risk of fraud, kidnapping, blackmail, violence or intimidation, or where the beneficial owner is a minor or otherwise incapable.
The Next Steps
The draft directive is expected to be adopted at a forthcoming plenary session of the European Parliament. When the legislative process is complete, member states will have two years to transpose the directive into national law.