UBO register act 27 September 2020

On 23 June 2020, the Dutch Senate adopted the legislative proposal regarding the implementation of the UBO register in the Netherlands (hereinafter: ‘Act UBO-register’). With this adoption, the Netherlands  implements the European directives no. 2015/849 and no. 2018/843. As a result of the Act UBO-register as of 27 September 2020 legal entities are obligated to register their UBO’s (Ultimate Beneficial Owners) in the UBO-register. The register indicates the natural person or persons who ultimately hold a direct or indirect interest in an organization. Entities incorporated before 27 September 2020 will have until 27 March 2022 to register their UBO’s. Entities incorporated after 27 September 2020 are obligated to immediately register their UBO’s. On 21 September 2020, by publishing the Decree on ‘Implementation on registration of beneficial owners of companies and other legal entities’, the Act UBO-register was further implemented.

The UBO-register serves to prevent the use of the financial system for money laundering and terrorists financing. The register provides transparency in the internal control structure of an organization so that people with criminal intent can no longer hide behind a legal entity. In addition, it is immediately clear to a (legal) person with whom they are doing business.

 

In this memo, we will further elaborate on the Act UBO-register.

 

Who is the Ultimate Beneficial Owner?

The UBO is the ultimate beneficial owner of a legal entity, i.e. the person who is the ultimate owner or has control over the organization. These are natural persons who:

  • hold more than 25% of the shares, voting rights or ownership interest directly or indirectly; and/or
  • exercise effective control over the legal entity.

 

Based on the foregoing, an entity can have multiple UBO’s, as we also will illustrate with the following example.

 

Example

A Stichting Administratiekantoor (i.e. Trust Foundation), in short ‘STAK’, holds 100% of the shares in a bv (i.e. private company with limited liability). The effective control of the STAK rests with the board. The STAK issues depository receipts for the shares in the bv to four depository receipt holders (in image: DR Holders), of which two depository receipt holders each hold 40% and two depository receipt holders each hold 10% of the depository receipts of shares in the bv. The board of the STAK is formed by Mr. X. The articles of association of this STAK stipulate that the dismissal and appointment of directors is decided upon by the board. Therefore, Mr. X cannot be fired against his will. The aforementioned situation is shown in the image below.

A depository receipt gives the holder an (economic) ownership interest in the entity of whose shares depository receipts have been issued. The STAK holds 100% of the shares in the bv. Therefore, the STAK holds the voting rights and retains the legal ownership interest in respect of the shares. This means that the depository receipt holders with each 40% of the depository receipts in hands can be qualified as UBO, because they hold more than 25% of the ownership interest in the bv. The other two depository receipt holders only each hold 10% of the depository receipts and therefore do not meet the threshold of 25% ownership interest to qualify as UBO. Furthermore Mr.X as the board of the STAK can also be qualified as an UBO of the bv, because he can exercise actual control over the bv by exercising the voting rights on the shares.

 

What if no UBO can be determined?

In the event that no UBO can be determined based on the applicable criteria, a pseudo-UBO must be registered. The pseudo-UBO is the person (or persons) who are responsible for the day-to-day business of the entity, for example the board or a partner.

 

Example

A bv has four shareholders, each with 25% of the shares. This situation is shown in the image below.

It follows from the image that the share interest of each of the shareholders does not exceed the threshold of 25%, thus none of the shareholders could be qualified as UBO of the bv. In this case, a pseudo-UBO must be determined. The board of the bv, who is responsible for the day-to-day business, therefore is the pseudo-UBO of the bv.

 

Which legal entities have to register their UBO?

The Dutch Chamber of Commerce (in Dutch: KVK) will address the organizations that are obligated to register, with the request to register. The following legal forms are obligated to actively register UBO’s (in Dutch, with English translation in parentheses):

  • de (nietbeursgenoteerde) nv en bv (unlisted limited company and private company);
  • stichtingen (foundations);
  • verenigingen (associations);
  • onderlinge waarborgmaatschappijen (mutual guarantee societies);
  • coöperaties (cooperatives);
  • maatschappen (partnerships);
  • vennootschappen onder firma (general partnerships);
  • commanditaire vennootschappen (limited partnerships);
  • rederijen (shipping companies);
  • Europese naamloze vennootschappen (SE) (European public limited companies (SE));
  • Europese coöperatieve vennootschappen (SCE) (European cooperative companies (SCE)); and
  • kerkgenootschappen (denominations).

 

The following legal forms are not obligated to register (in Dutch, with English translation in parentheses):

  • eenmanszaken (sole proprietorships);
  • beursgenoteerde nv’s en bv’s (listed limited companies and listed private companies);
  • 100% dochtervennootschappen van beurgenoteerde vennootschappen (100% subsidiaries of listed entities);
  • verenigingen van eigenaars (owners’ associations);
  • rechtspersonen in oprichting (legal entities in formation);
  • verenigingen met beperkte rechtsbevoegdheid die geen onderneming drijven (associations with limited legal capacity that do not conduct a business);
  • publiekrechtelijke rechtspersonen (legal entities under public law); and
  • overige privaatrechtelijke rechtspersonen, bijvoorbeeld hofjes en gilden (other legal entities under private law, such as guilds / courtyards).

 

Foreign legal entities that have their registered office abroad, but have an establishment in the Netherlands, are also exempt from registering in the Netherlands.

 

Which information has to be registered?

As of 27 September 2020, at 08:00, entities can register their UBO’s. Entities must register the following information from the UBO:

  1. first name and surname, month and year of birth, nationality, state of residence and the nature and scope of the economic interest; and
  2. the BSN / foreign tax identification number (TIN), date of birth, country and place of birth, home address, copy of valid proof of identity and copy of documents showing the nature and scope of economic interest.

 

The economic interest under 1. does not need to be specified, but is divided into the following classes:

  1. more than 25% to 50%;
  2. more than 50% to 75%; and
  3. more than 75% to 100%.

 

The economic interest can be substantiated with one or more of the following documents:

  • register of shareholders;
  • articles of association;
  • register of holders of depository receipts;
  • deed of incorporation;
  • register of members;
  • organization chart;
  • registration of trade register; and
  • other notarial deeds.

 

The documents used by entities to substantiate the economic interest must be deposited in the register. The Chamber of Commerce will only marginally check the substantiation of the economic interest by the deposited documents.

 

Who has access to the UBO-register?

The register is maintained by the Chamber of Commerce and is publicly accessible. People who want access to the UBO-register will have to register, whereby the identity of these consulters will be established by the Chamber of Commerce. At own request, UBO’s do get insight into how often their information is consulted, but not by whom. In addition, only the data under 1. will be publicly accessible. Only competent authorities, such as the Financial Intelligence Unit, The Tax and Customs Administration, AFM, DNB and the Public Prosecution department, have access to the data under 2. The UBO’s do not gain insight into how often these authorities access on the information in the register.

 

The possibility to not disclose UBO information is only permitted in the following cases:

  • the UBO is a minor (younger than 18);
  • the UBO has been placed under guardianship / administration by the court; or
  • the UBO is under the protection of the (regional) police.

 

However, in the event of non-disclosure, the aforementioned authorities continue to have full access to the UBO data in the register.

 

Duty to report back

Certain institutions and / or professions, such as banks, civil-law notaries, accountants, tax advisors and lawyers, that request UBO data and notice that there is a discrepancy between the data from the UBO register and in reality, have the obligation to report this to the Chamber of Commerce. Therefore, this obligation also applies to PKF Wallast.

 

What are the sanctions on non-compliance?

Organizations are responsible themselves for monitoring UBO information and to update if necessary. Failure to comply with the obligation to register UBO’s qualifies as an economic offense. A violation of one of the following obligations therefore qualifies as an economic offense:

  1. the registration of the (information of the) UBO’s in the register;
  2. the collection and keeping track of the current information by the organization about their UBO’s;
  3. the obligation of the UBO to provide the organization with this information; and
  4. the “duty to report back” for institutions, as follows from the Money Laundering and Terrorist Financing Prevention Act.

 

A violation of the aforementioned obligations is qualified as an offense with up to six months imprisonment, a community service order or a fine of the fourth category (2020: EUR 21.750). If the obligations as stated under (ii) to (iv) are deliberately not complied with, the violation could even be classified as a crime with possibly a prison sentence as a result.

 

Legislative proposal 17 April 2020 UBO for trusts and similar legal constructions

On 17 April 2020, a draft legislative proposal was submitted for internet consultation, which will make it also mandatory for trusts and similar legal constructions to register the UBO in the register. The UBO in trusts or similar legal constructions, such as open and closed mutual funds, then must be registered. The UBO-register and the relevant rules for trusts and similar legal entities will (as far as is currently known) largely be organized in the same way as the UBO-register for legal entities.

 

The internet consultation regarding the legislative proposal was closed on 15 May 2020. Monitor our website for more information about the UBO bill for trusts and similar legal constructions.

 

Conclusion

If you have any further questions in respect of processing and registering your UBO information, please contact your relation manager or a legal counsel of PKF Wallast.

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