From January 2020, UBOs of particular legal entities are obliged to register in the Dutch UBO register. This registration duty follows from the “Registration of Ultimate Beneficial Owners of Companies and other Legal Entities Implementation Act”, submitted to the House of Representatives on 4 April 2019. The legislative bill complies with the implementation of Directive 2018/843 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (the ‘Directive’).
This article sets out whether, according to the legislative bill, your legal entity falls under the new registration duty and what the consequences of this duty to register are.
What is an UBO?
According to the Money Laundering and Terrorist Financing (Prevention) Act (Wwft), the Ultimate Beneficial Owner, or the “UBO”, is the ultimate owner of, or has control over, a company or other legal entity registered in the Commercial Register of the Chamber of Commerce. For a further description of this definition and an explanation of the definition of a so-called ‘pseudo UBO’, please see our article ‘UBO Definition and the UBO register‘.
Who are obliged to register the UBOs?
By means of the legislative bill, the following companies or other entities incorporated in the Netherlands are obliged to register their UBOs:
- Private limited companies and unlisted public limited companies;
- European public limited companies, European Economic Interest Groupings and European Cooperative Societies;
- Cooperatives and mutual insurance companies;
- Associations with full legal capacity and associations without full legal capacity who run an undertaking;
- Foundations, including foundations with PBO status and Trust Office Foundations (STAK);
- Partnerships: professional partnerships, limited partnerships and general partnerships; and
- Shipping companies.
It is noteworthy that certain legal entities do not fall under the registration duty. They include sole traders, legal entities under public law, informal associations and churches. Foreign legal entities with a principal establishment or secondary establishment in the Netherlands also do not have to register the UBO. An undertaking which is not (or no longer) established in the Netherlands but does belong to a partnership, limited partnership, general partnership or a shipping company formed in the Netherlands, must register (again).
This registration duty applies expressly to a Trust Office Foundation (STAK) as the foundation is included as an entity.
A mutual fund is a tax law concept. These funds are not described in civil law or company law and can be shaped in various ways. These funds fall under the obligation resting on trusts and similar legal constructions to collect information about their UBO and register this centrally. This obligation will be set out in a separate legislative bill in respect of which the Directive states that implementation must have taken place at the latest on 10 March 2020.
Mutual funds and limited partnerships are in practice regularly used for the protection of privacy and asset management. The legislative bill does not include provisions leading to the publication of financial details of the fund or the limited partnership in the Commercial Register.
What does the registration duty mean?
The registration duty for the UBO means that particular details must be provided to the Chamber of Commerce so that these details can be included in the UBO register. The UBO register will be linked to the Commercial Register. Only part of the information to be provided will be publicly accessible.
It relates to the following details of the UBO:
- Name;
- Month and year of birth;
- Nationality;
- Country of residence; and
- Nature and extent of the commercial interest held by the UBO (ranges of 25% increments, so between 25% and 50% and 50% and 75% etc. and no monetary amounts will be stated).
The following information is not publicly accessible and can only be inspected by the competent authorities and Financial Intelligence Unit (Financiële Inlichtingen Eenheid – ‘FIE’). The competent authorities (such as the civil-law notary, the Netherlands Authority for the Financial Markets) and the FIE are under a duty of confidentiality in this respect.
It relates to:
• Date, place and country of birth;
• Address;
• Citizen service number (Burgerservicenummer – BSN) and/or taxpayer identification number (TIN);
• Copies of documents on the basis of which the identity of the UBO is verified; and
• Copies of documents showing why the registered person has UBO status, indicating the nature and extent of the commercial interest of the UBO.
The legislative bill has not responded to the criticism relating to the privacy of data of the UBO. The UBO can only make a request to protect his details which are available to everyone in the following limited cases:
- exposure to a disproportionate risk;
- a risk of fraud, kidnapping, blackmail, extortion, violence or intimidation;
- minority; or
- other type of legal incapacity.
This protection does not apply for the competent authorities and FIE. The UBO information will not be published as long as there is no irrevocable (after objection and appeal) decision on the request for protection of the data. The assessment criteria for allowing or rejecting the request have not (yet) been published.
Obligation and sanctions
Those to whom the company or other legal entity belongs, as well as every director, is obliged to have the UBO information registered. If a legal entity does not comply with the obligation to register the UBO in the Commercial Register, this could lead to a criminal or an administrative sanction. An administrative sanction includes a charge (obligation) under periodic penalty payment or an administrative penalty. A criminal sanction as the result of committing an economic offence may arise if there are aggravating circumstances, such as the deliberate passing on of incorrect UBO information.
Latest registration date
After the bill comes into force, which on the basis of the Directive must have happened at the latest on 10 January 2020, all legal entities must during incorporation register a (pseudo) UBO in the UBO register. Legal entities already in existence before the date of the implementation will have eighteen months to comply with the registration duty. This period starts immediately after the Directive comes into force and will most probably end on 10 July 2021.
So, consider in good time whether your legal entity falls under the new registration duty and register your UBO as soon as possible in the Commercial Register. By means of a quick-scan we can together with you determine which registration obligations apply to you and the entity in which you are involved in accordance with the new UBO legislation.
If you have any further questions relating to the consequences of this Directive for your legal entity, you can always contact Dirkzwager legal & tax.