Today (23 June 2020), the Dutch Senate adopted the bill to implement the Dutch Ultimate Beneficial Owner (''UBO'') register (''UBO register''). We expect the Act to enter into force soon. After the Act entered into force, legal entities will have to collect, maintain and register information about their UBOs in the UBO register. Existing legal entities will be given 18 months to do so. However, newly established legal entities must immediately record their UBO(s) when they first register their business with the trade registry.
Implementation of Fourth Anti-Money Laundering Directive
The obligation to set up a UBO register derives from the Fourth Anti-Money Laundering Directive (EU/2015/849), as amended by the Fifth Anti-Money Laundering Directive (EU/2018/843). The UBO register must help to prevent the financial system from being used for money laundering or terrorist financing.
Legal entities must register their UBOs themselves with the UBO register, which is managed by the Dutch Chamber of Commerce. Certain UBO information will be publicly available: the UBO’s name, month and year of birth, country of residence, nationality and the nature and extent of the beneficial interest the UBO holds. In our Short Reads of 11 April 2019 and 6 February 2020 (in Dutch), we discuss the various parts of the bill in detail.
Who is subject to registration?
The obligation to register UBO(s) will apply to the following entities:
- Private companies with limited liability (BVs) and public companies (NVs), other than those listed on a regulated market or 100% direct or indirect subsidiaries of such entities;
- European public companies (SEs);
- European economic interest groupings (EESVs);
- European cooperative companies (SCEs);
- Cooperatives (coöperaties) and mutual insurance associations (onderlinge waarborgmaatschappijen);
- Associations (verenigingen) with full legal capacity and associations with limited legal capacity operating a business;
- Foundations (stichtingen);
- All types of partnerships (v.o.f., C.V., maatschap); and
- Shipping companies (rederijen).
Webtool: UBO and pseudo-UBO
A UBO is a natural person who ultimately owns or controls the corporate or legal entity. There can be more than one UBO for a single entity. A Governmental Decree (Uitvoeringsbesluit Wwft 2018) defines which individuals must automatically be considered a UBO in various scenarios.
When (i) the UBO cannot be determined under these rules, and there are no anti money laundering suspicions, or (ii) there is doubt regarding the identity of the UBO, the senior management will be considered UBOs (this is known as a "pseudo-UBO"). Under Dutch law, the natural person(s) who are managing director(s) will be regarded as senior management.
Our Stibbe UBO Webtool determines under which conditions a natural person can be regarded as a UBO. Our webtool will also clarify which information needs to be registered with the Dutch UBO register.
Listed companies and their 100% subsidiaries: Minister clarifies the regulation
Listed companies and their 100% subsidiaries are exempt from the obligation to register their UBOs. The Minister has clarified that these are listed companies which are subject to the Transparency Directive, or companies which are listed in a state outside the EU insofar as those companies are subject to EU-equivalent disclosure requirements in that state. The Minister also confirmed that indirect wholly owned subsidiaries of these listed companies are also exempt from the registration requirement.
In exceptional circumstances, the UBO may submit a request to the Chamber of Commerce to block public UBO information in the register. This means the information will be registered but not made available to the public. Until the Chamber of Commerce has irrevocably decided on such a request, the information will remain blocked. Article 30 paragraph 9 of the Fourth Anti-Money Laundering Directive allows blocking if the UBO is exposed to a disproportionate risk, risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation. A detailed evaluation of the exceptional nature of the circumstances must be made on a case-by-case basis.
The Chamber of Commerce itself does not assess whether there is a sufficient risk of foreclosure. Instead, the Chamber of Commerce verifies whether the police provide personal security on the basis of the Guarding and Security Circular 2019. If that is the case, the Chamber of Commerce blocks public personal data for a period of five years.
This regime is in line with the regime that also applies to the Land Registry. The Minister noted that UBOs can report to the police or the Public Prosecution Service in advance if they expect that there will be a disproportionate risk in the event of disclosure of the data. However, it is not yet clear how the police and the Public Prosecution Service will deal with this.
When does the UBO registration obligation take effect?
After the Act comes into force, existing legal entities will have 18 months to register their UBO(s) with the UBO register. However, new legal entities must register their UBO(s) when they first register with the trade register when they register their company. The Chamber of Commerce will inform all relevant entities of these new obligations and provide more details about the practical details of the UBO registration obligation.
What happens if the UBO information is not provided?
Legal entities are obliged to deliver UBO information to the Chamber of Commerce. The relevant UBO(s) must cooperate with a request for information. Not complying with these rules may result in an administrative or criminal sanction for both the legal entity and the UBO.
Internal register of foundations
In addition, the board of a foundation is obliged to register in its own administration all beneficiaries who receive a payment of 25% or less of the amounts paid out in a certain financial year (Article 2:290 of the Dutch Civil Code, DCC). The Minister has clarified that this obligation should be seen as a specification of the administration obligation under Article 2:10 DCC. Foundations are not asked to collect more data about the persons to whom they donate than they already collect under their accounting obligation.
Consultation on proposed legislation on trusts and similar legal constructions
There will also be a register for UBOs of trusts and similar legal constructions. To this end, a consultation was held in the period from 17 April 2020 to 15 May 2020.
The responsibility for the registration of UBOs of trusts and similar legal arrangements rests with the trustee. The Chamber of Commerce manages this register. As with the UBO register for legal entities, certain information is public while other information is only accessible to the Financial Intelligence Unit (FIU) and the competent authorities such as the FIOD and the Tax and Customs Administration.
It is not yet known precisely when the law will enter into force. Once it does, a transitional period of three months will be applied for compliance with the obligation to register. After the transitional period, registration must take place no later than one week after the event which triggers the obligation to register.
Update 7 July 2020
The Act was published in the Bulletin of Acts, Orders and Decrees on 7 July 2020, together with the decree regarding the entry into force. The Act will (partly) enter into force on 8 July 2020. It concerns the obligation for legal entities to collect and maintain information about their UBOs and the obligation for foundations to register all beneficiaries who receive a payment of 25% or less. The obligation for legal entities to register the UBO information in the UBO register and related obligations will enter into force on 27 September 2020. After 27 September 2020, existing legal entities will have 18 months for this registration. However, new legal entities to be set up will already have to register their UBO(s) after 27 September 2020 when they first register with the trade register for the registration of their business. For more information on the entry into force, see our short read of 7 July 2020.