Amendment to Act on Register of Beneficial Owners

Less than a year has passed since the new law on the registration of beneficial owners came into force, and already the Ministry of Justice together with the Ministry of Finance is proposing an amendment to change, inter alia, the beneficial owner definition.

The draft amendment has not yet been submitted to the deputies; the inter-ministerial comment procedure has just been completed. The amendment is proposed to take effect on the day following its promulgation; the moment of applicability of the proposed changes will therefore depend on the speed of the legislative process.

This is not just a technical amendment to remove some inaccuracies in the existing legal regulation, but a significant change in determining beneficial owners. The proposal drops the terms "person with ultimate influence" and "ultimate beneficiary" and now defines beneficial owner as "any natural person who ultimately owns or controls a legal person or legal arrangement".

According to the newly amended definition, the beneficial owner in a business corporation is any natural person who

  • is the controlling person pursuant to the Corporations Act
  • owns or controls the corporation by:
    • holding a direct interest or shareholding or voting rights including bearer shares of more than 25%
    • having a direct or indirect right greater than 25% to a share of profits, other own funds, or a liquidation balance
    • may control a corporation or corporations that individually or collectively hold an interest or bearer shares in the corporation greater than 25%
    • may control the corporation by other means (control is, inter alia, defined by the criteria set out in the Directive of the European Parliament and of the Council).

The definition of the material beneficial owner for foundations, institutes, public-benefit corporations, or trusts (in the wording of the act ‘other legal arrangements’) will then be newly established directly in Section 6 which deals with these persons and legal arrangements. For these persons and arrangements, the beneficial owners will still be certain specific persons whose position of beneficial owner results from their function (e.g., founder, trustee, nominated beneficiary). However, it will also be necessary to ascertain whether there is another person who would ultimately own or control them.

The amendment also introduces minor changes to automatic entries into the register of beneficial owners and to the definition of persons who do not have a beneficial owner. Other changes are of a more formal or technical nature. The registration and sanction processes remain essentially unchanged.

According to the transitional provisions, registrants (e.g., companies) will be obliged to adapt their record in the register to the new regulation within 6 months from the date the new law enters into effect. These persons should then be exempted from paying the court fee.

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