Starting from 1 January 2018, all business corporations are newly obligated to keep and continuously update the data necessary to ascertain and verify the identity of their real owner including the reasons why the person in question is deemed to be the real owner; an obligation which has, rather non-traditionally, arisen from the law on certain provisions against money-laundering and terrorist financing. But who, then, is the real owner?
According to the definition stipulated by law, the real owner is an individual who may in actual fact or legally exercise directly or indirectly a dominant influence over the legal entity, trust fund or another legal arrangement without a legal personality; it means there always needs to be a specific individual lying behind the organization. In the case of legal entities whose shareholder is another legal entity, or whose shareholder’s shareholder is another legal entity etc., it will always be necessary to pinpoint the last specific person who is at the end of the chain of the shareholders so that it would be possible to ascertain who really owns the company.
Furthermore, the law defines clues which are to be used to ascertain the real owner (unless proved to the contrary). The real owner is a person who:
- Has on their own or with other persons acting in conformity more than 25 % of the voting rights or owns more than 25 % of shares,
- Controls on their own or with other persons acting in conformity with the person defined in article a),
- Should be a beneficiary of at least 25 % of the profit of the business corporation, or
- Is a statutory body member, a representative of the legal entity in the statutory body or in a position similar to that of a statutory body member if the real owner may not be ascertained in accordance with the previous articles.
Even if the real owner of a business corporation cannot be ascertained on the basis of the shareholders, e.g. if the shareholder is a foreign legal entity which does not know its ownership structure, or a person would not be a real owner in accordance with the above conditions (i.e. one not really exercising the dominant influence), a statutory body member of the business corporation would be seen as the real owner. Each company, then, will have to name an individual as the owner.
The law also imposes on legal entities an obligation to keep internal record of their real owners including documents explaining the relation between the real owner and the legal entity. The information is to be kept during the period of the real owner enjoying their status and at least 10 years after the relation has ceased to exist. Also, we would like to point out that the obligation is binding for all legal entities, i.e. including those established before 1 January 2018, when the new law became effective.
In a direct connection with the above, a new register of real owners of legal entities entered in the public registries has been established; it is a non-public list administered by courts maintaining commercial registry containing entries with the name, address, the date of birth, nationality/citizenship, and information proving that the person is a real owner. According to the transitional provisions, all legal entities are obligated to report their real owners into the register within one a one-year period after the law came into effect (i.e. no later than 1 January 2019).
Should a legal entity fail to do so, or should doubts as to the accuracy of the entries arise, entitled authorities, i.e. courts, law enforcement authorities, financial administration authorities etc., may require the legal entity to amend the situation and submit the necessary data.
In conclusion, we would like to recommend that all legal entities should fulfill the obligation during 2018 and enter their real owners despite the fact that the law does not expressly define any sanctions for not doing so.
