New rules regarding beneficial owners

New rules on the identification and registration of real owners

As of 23 May 2017 Danish legal entities are required to report their real owners to the Danish Business Authority. The registration deadline is 1 December 2017. The new rules are based on the fourth money laundering directive.

The real owners of a legal entity

The term “real owner” means a natural person who directly or indirectly through another legal entity owns or exercises control of the legal entity in question. As a main rule, it is an indication of control if the person in question, either directly or indirectly through another legal entity, holds 25% or more of the capital in the legal entity in question or the voting rights at the general meeting.

However it is also possible to control a legal entity indirectly in other ways, for example through rights established in the articles of association, the shareholders agreement or the pledge of shares. These rights could for example be the right to announce members of the company’s management, the right to approve the annual report, a veto-right or similar.

It is also a possibility that a legal entity does not have real owners.

Which legal entities are subject to the registration duty

Following legal entities are, among others, required to register their real owners to the Danish Business Authority: public limited companies (A/S), private limited companies (ApS), entrepreneur companies (IVS) and limited partnership companies (P/S, K/S) and a number of other companies and businesses. The full list of the legal entities that are obliged to register their real owners can be found on the homepage of the Danish Business Authority under following link:

https://erhvervsstyrelsen.dk/reelle-ejere

Additionally, the Danish Business Authority has published a guideline regarding the identification and registration of real owners. The guideline is unfortunately only available in Danish and can be found under following link:

https://erhvervsstyrelsen.dk/sites/default/files/vejledning_om_reelle_ejere.pdf

The duty to obtain information regarding the real owners

The legal entity is obliged to obtain information regarding the real owners. The legal entity therefore must take those measures to make it possible to identify the real owners or to find that the legal entity has no real owners.

The information that the legal entity is obliged to collect is among others information about the real owner’s identity and the real owners’ rights in relation to the legal entity, hereunder ownership and purchase rights to shares. The legal entity has to be able to document how the real owners have been identified.

In addition, the legal entity is required to update the information about the real owners. Changes must be registered to the Danish Business Authority. According to the guidelines of the Danish Business Authority this information must be updated at least once a year,

The duty to register the real owners

The legal entity is obliged to register its real owners in the IT system of the Danish Business Authority (CVR-register). A real owner is not required to register himself. The registered information, except for the real owner’s Danish CPR-number or equivalent foreign identification number, will be published in the CVR-register.

The following information must be registered:

  • Full name, address and date of birth
  • Nationality
  • Residence and country
  • Nature and extent of the real owner’s rights in the legal entity
  • CPR-number or equivalent documentation which ensures clear identification of the person concerned

The registration must be made as soon as possible after the legal entity becomes aware of that a person has become a real owner of the legal entity or changes have occurred. According to the legislative material, this means that the legal entity cannot wait several days for the registration.

If the legal entity has no real owners or it is impossible to identify the real owners, the daily management of the legal entity has to be registered as real owners. In that case, it must be stated why the daily management has been registered.

If a legal entity does not fulfill its registration obligations, the legal entity risks being subject to daily fines until proper registration has been made.

The duty to retain the information

The new rules finally oblige legal entities to retain information about the real owners of the legal entity, including the attempts to obtain the identification of real owners. These information must be retained for five years after the termination of the real ownership or the entity’s request and attempt to obtain such information.

Upon request the legal entity must be able to disclose this information to the Danish Public Prosecutor for Special Economic and International Crimes (SØIK) or another public authority, such as the Danish Business Authority or the Danish Tax Authority (SKAT).

Since an identification of the real owner, as well as their rights in the legal entity, can be a lengthy process, we recommend that you, if your legal entity is obliged to identify and register its real owners, already begin this process now. We will of course assist you with the identification and registration of the real owners.

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