by Sabrina Burke November-29-2016 in Commercial & Business
The European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) regulations 2016 came into effect on 15 November 2016. In order to comply with these regulations, most Irish companies and other legal entities incorporated in the state will need to take immediate steps to establish and maintain a register of beneficial owners.
Who is a beneficial owner?
A beneficial owner is defined in the EU’s Fourth Anti-Money Laundering Directive 2015/849 as a natural person who ultimately owns or controls a legal entity through direct or indirect ownership of a sufficient percentage of the shares or voting rights or other ownership interest in that entity. A person who directly or indirectly owns more than 25% of the shares in an entity, or who has an ownership interest of more than 25% in the entity can be deemed to be a beneficial owner.
Do the regulations apply to you?
The relevant entities to whom the regulations apply are every company or other legal entity incorporated in Ireland with the exception of:
- entities listed on a regulated market that is subject to disclosure requirements consistent with the law of the European Union, or
- entities subject to equivalent international standards which ensure adequate transparency of ownership information.
What information must be contained on the register of beneficial owners?
Every relevant entity must take all reasonable steps to obtain and hold adequate, accurate and current information in respect of its beneficial owners, including the following:
- name
- date of birth
- nationality
- residential address
- a statement of the nature and extent of the interest held by each such beneficial owner
- the date on which the beneficial owner was entered in the register of beneficial owners
- the date on which that person ceases to be a beneficial owner.
Every relevant entity has a duty also to keep the information on the register of beneficial owners up-to-date, to take account of any changes in the beneficial owners or their relevant details.
What steps must be taken to establish the identity of the beneficial owners?
In some cases, the beneficial owners of a relevant entity may be easily identified. Where this is not the case, the relevant entity must take steps to:
- give notice to any individual that it reasonably believes may be a beneficial owner asking him/her to confirm the position and if they are, to provide his or her details as listed above within one month of the date of the notice
- give notice to any person or entity who the relevant entity reasonably believes may have information concerning the beneficial owners asking them, to confirm whether or not they know the identity of the beneficial owners or any person likely to have that knowledge and, if so, to supply the relevant details within one month of the date of the notice.
The relevant entity must keep a record of the steps it took to identify the beneficial owners.
What happens if the beneficial owners cannot be identified?
If, after having exhausted all possible means, the beneficial owners cannot be identified or, if there is any doubt that a person identified is in fact a beneficial owner, the relevant entity must instead list its own senior managing officials (i.e. its directors and/or CEO) as the beneficial owners on the register.
Does a beneficial owner have a duty to notify his or her status as a beneficial owner to the relevant entity?
Yes, if an individual is a beneficial owner and knows, or ought reasonably to know, that to be the case but the individual is not listed on the register of beneficial owners and has not received a notice from the relevant entity, then that individual must notify the relevant entity of his or her status as a beneficial owner and provide his or her relevant details.
Where an individual is already listed on the register of beneficial owners, he or she also has a duty to notify the relevant entity if he or she ceases to be a beneficial owner or if there is any change in his or her details.
Consequence for failing to comply with the regulations
If a relevant entity fails to comply in maintaining a register of beneficial owners or in sending the required notices as described above to an individual believed to be a beneficial owner or who may have information regarding the beneficial owners, the relevant entity is guilty of a criminal offence and is liable, on summary conviction, to a fine.
Similarly, where an individual who is a beneficial owner fails to advise a relevant entity of his or her status, or where he or she receives one of the notices described above and fails to comply with the notice or makes a statement that is false or is reckless as to whether or not the statement is false, that individual commits a criminal offence and is liable, on summary conviction, to a fine.
Purpose of the regulations
The regulations have been introduced in anticipation of the Fourth Anti-Money Laundering Directive (MLD4) which is due for transposition into Irish law in June 2017.
When MLD4 comes into effect, the Irish Government must ensure that the beneficial ownership information of corporate entities in Ireland is held in a central register which must be accessible in a timely and unrestricted manner to:
- national competent authorities and financial intelligence units, without any restrictions
- entities required to carry out customer due diligence; and
- any person or organisation that can demonstrate a legitimate interest.
The state will populate the central register with the beneficial ownership information which Irish companies are now, as of 15 November 2016, required to obtain and maintain. It is not yet known how this information will be transferred to the central register or who will operate the central register (though it is widely speculated that the Companies Registration Office will operate the register).
The regulations introduce a significant change for Irish companies as up until now it has been a long established principle of Irish company law that companies do not need to recognise/record the beneficial owners of its shares. It also remains to be seen whether the Irish Government will follow the UK’s lead with its ‘persons with significant control register’ and extend access to beneficial ownership information on the Irish central register to the public generally without restriction. Watch this space – hopefully we should have more information on these points in early 2017.
For more information on the Central Register of Beneficial Ownership of Companies click here.
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About the Author
Sabrina Burke
Sabrina is a senior associate solicitor in the Commercial & Business team at Hayes solicitors. Sabrina's main area of work is mergers and acquisitions, where she acts for buyers and sellers across various industry sectors. She also advises on corporate reorganisations, shareholder agreements and other commercial arrangements and contracts including agency/franchise/distribution agreements.