Beneficial ownership register to be introduced throughout EU

Companies and other legal entities incorporated in EU member states will have to keep a register of beneficial owners from Summer 2017. The law forms part of the 4th Money Laundering Directive which was passed by the EU legislature on 20 May 2015 and echoes the “persons with significant control” (PSC) register being introduced in the UK from January 2016 under the Small Business, Enterprise and Employment Act 2015 (click here for our PSC register hub).

In keeping with the principles of the UK’s PSC register, the key provisions of the EU beneficial owner register are as follows:

• The beneficial owners of an entity will be the natural persons who ultimately own or control the entity through direct or indirect ownership of more than 25% of the shares or voting rights or “ownership interest” in that entity, or through control via other means.
• Entities will be under an obligation to obtain and hold the information, which will also be held in a central register in each member state.
• There will be an exemption for companies listed on a regulated market which are subject to the EU disclosure rules (in the UK this is DTR 5) or equivalent international standards.

In contrast with the UK’s PSC register which will be publicly accessible online via Companies House, the EU’s beneficial owner register will only have to be available to “competent authorities and financial intelligence units” without restriction. Entities which are obliged to carry out customer due diligence will also be able to access the register. Anyone else will only be able to access the register if they can demonstrate a “legitimate interest” in suspected money laundering, terrorist financing and related offences such as corruption, tax crimes and fraud. The EU gives the example of an investigative journalist or NGO. These are minimum requirements: member states will be able to go further if they wish (as the UK has done with the PSC register).

Comment

The UK has taken the lead in creating a register of beneficial ownership, and it is likely that the experiences of the UK will be looked at by other EU member states as they come to implement the Directive in their domestic jurisdictions. The UK in turn will need to consider whether the PSC register legislation fulfils the minimum requirements of the Directive and there may well be areas of inconsistency which will need to be reconciled.