Submission of information on ultimate beneficiaries in Ukrainian companies in 2023

An ultimate beneficial owner is any individual who holds decisive control over the operations of an entity conducting a financial transaction on behalf of that entity.

For instance, for a legal entity such as a Limited Liability Company (LLC), the ultimate beneficial owner is any natural person who exercises significant influence over the company's operations.

In our article, legal experts will discuss the changes to the disclosure of beneficiaries during wartime and who is responsible for providing information about ultimate beneficiaries to Ukrainian government authorities and when.

How to determine the influence of an individual on a Ukrainian company, and who is the beneficiary?

We should distinguish between direct or indirect influence.

Direct influence is when several natural persons are members in a legal entity (for example, an LLC) and will be the ultimate beneficial owners (provided they own 25 percent or more of the charter capital of that LLC). Specifically, these participants, when gathered at a general meeting, can directly make decisions about the activities of the LLC.

Indirect influence on the other hand, occurs when one or more legal entities are part of another legal entity such as LLC 1. In such a scenario, the ultimate beneficial owners of LLC 1 would be the same as those of LLC 2.

Decisive influence refers to the direct ownership of at least 25% of the charter capital by an individual.

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What do I need to file about the beneficiaries and what changes are coming soon?

Currently, a simplified diagram is provided to show the ownership structure of a company, indicating who the owners are and what percentage each one owns. 

Certified copies of beneficiaries' passports are also required. These documents must be notarized, and for foreign documents, an apostille or legalization is required.

The only exception is for Ukrainian passport IDs, which do not require notarization.

Starting from December 29th, 2022, changes to the procedure for disclosing ultimate beneficial owners (as introduced by bill #6320) will take effect. The main changes are:

• Information about beneficiaries will no longer need to be provided annually;
• It will only be required to update the information when changes are made to the legal entity;
• The form for submitting information about the beneficiaries will be electronic, requiring an electronic digital signature (EDS);
• Notarization, apostille, or legalization of documents will no longer be required. Instead, an electronic signature will suffice. However, if the documents are in a foreign language, they must be translated and certified beforehand;
• Penalties (from 17 to 51 thousand UAH) will be imposed for failure to provide information about beneficiaries.

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Who needs to provide information about the ultimate beneficiaries?

At present and until the changes take effect, all legal entities must provide this information. However, in the future, legal entities whose members are solely individuals will be exempt from this obligation as the ownership structure is already visible in the register.

Additionally, there are certain legal entities, such as political parties, trade unions, association of co-owners of an apartment building, and state and communal structures, that are not required to disclose their ownership structure.

Penalties for failure to provide information about beneficiaries, including during a state of war

Under current legislation (which is in effect until December 29, 2022), everyone was required to provide information about ultimate beneficiary owners by July 11, 2022. However, due to the ongoing war, many people did not comply.

To address this, the government issued a resolution requiring submission of this information within one month after the end of the state of war. However, to avoid problems in case of sudden changes in legislation and to save time standing in queues, we recommend submitting this information right away if possible.

We recently helped a client who attempted to submit their beneficiary documents but made mistakes in the process. 

Our company provides assistance to businesses in Ukraine and we make submitting information about ultimate beneficiaries fast and easy.

If you're interested, you can learn more about our services and pricing here.