New Final Beneficiary Law: What Has Changed?

How is the concept of final beneficiaries now formulated?

According to subparagraph 30, part 1, Article 1 of the aforementioned law, the final beneficial owner in relation to the legal entity is defined as a natural person who has the possibility to exercise decisive influence on the legal entity’s activity.

Signs of decisive influence:

• Direct influence on legal entity - if the person holds a share in its authorized share capital of 25% or more;
• Indirect but decisive influence - if the person holds a share in the authorized share capital of a legal entity in the amount of 25% or more through related parties.

Please note! A person who formally holds 25% or more of the authorized share capital, but acts only as a nominal holder, is not considered to be the final beneficiary.

However, the law does not yet provide for a mechanism to identify “nominee holders”.

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How will changes in legislation affect the registration procedure in the Unified State Register?

Based on the text of the Law No. 755-IV regulating the registration of LLCs, in case of any changes stipulated by the provisions of the law, it is necessary to submit the ownership structure and a copy of the identity document of the final beneficiary. And even if nothing changes at all, and the legal entity switches to the model charter, then according to Part 7 of Article 17 of this law, the final beeficiary documents shall be also submitted.

What does this mean? It means that whatever changes you have made, you will have to update the information about the ultimate beneficiary and file the appropriate documents. And, of course, when registering a legal entity for the first time, information and documents on the ultimate beneficiary must be filed immediately upon registration. Exception: those legal entities that have no ultimate beneficial owners. For example, public organizations.

Lack of documents on the beneficiary can be the reason for refusal in registration of changes due to failure to submit a full package of documents.

What kind of documents are submitted for the final beneficial owner?

From now on, during initial registration and amendments, the applicant must also submit the following documents:

• A notarized copy of the beneficiary’s identity document (it is usually a passport, less often a residence permit). Note: Ukrainian ID-passport does not require notarization;
• Document on registration of a legal entity in the country of its location, if the founding member of the Ukrainian legal entity is a foreign legal entity;
• Ownership structure, form and content of which is defined by the legislation. This point raised additional questions for many people. At the time of writing this article, the document on the form and content of ownership structure has not yet been approved, and therefore, before its approval, there is no need to submit such document (unlike the previous two documents).

Who shall show their beneficiaries?

All legal entities are obliged to show the final beneficial owners, even if they did not intend to carry out any registration actions in the Unified State Register.

Paragraph 4 of the Transitional Provisions of the Law on Prevention of Money Laundering stipulates that legal entities registered before the entry into force of the law, i.e. before 28 April 2020, must submit information on the beneficiaries within three months from the entry into force of the regulatory act which approves the form and content of the ownership structure.

As we have already said, at the time of writing this article, this document hasn’t been yet approved, and this is what creates a situation of certain tension. Those who remember the transition from one classifier of economic activities and the first stage of making information about the final beneficiaries, know that 3 months is very short period. Therefore, it is desirable not to delay until the end of the period prescribed by law, because the queues at the registrars will only increase.

Please note! Information about the final beneficial owners will have to be updated annually. According to the Law regulating the LLC registration, legal entities have to confirm the relevant information annually within 14 calendar days, starting from the anniversary of company registration.

What are the consequences of failing to submit/update information on ultimate beneficial owners?

As we said at the very beginning of this publication, the Code on Administrative Offences has also been amended (unlike the Classifier of Economic Activities).

According to Part 6 of Article 166-11 of the Code, the failure to submit or late submission of information about the final beneficiaries, entails a fine of 1 to 3 thousand tax-free minimum income of an individual, i.e. from UAH 17,000 to 51,000.

What if it is difficult to reach the final beneficiaries?

In cases, when the founding member of the Ukrainian legal entity is a foreign legal entity, which, in turn, was also founded by legal entities - there may be questions in the interaction with banks: both when opening bank accounts, and during payments.

Therefore, if it is acceptable actually for the final beneficial owner, it makes sense to think about simplifying the ownership structure. We can help you with this.

If you want to make changes to the information about your LLC, or register your business without any problems, don’t hesitate to contact us. We can easily solve any your problem.