Company Secretaries and new beneficial ownership rules

The new Luxembourg beneficial ownership law dated 13 January 2019, implementing an aspect of the EU’s fourth anti-money laundering directive (the RBO Law), entered in to force on 1st March, as completed by the Grand Ducal Regulation dated 15 February 2019 and the circular LBR 19/01 from the Registre de Commerce et des Sociétés (RCS).

The key points of this new regulation were highlighted by Julie Prunier, a senior associate with dlaw. She was speaking at the “Register of Beneficial Owners from a Company Secretary's Perspective” ILA Breakfast Briefing held in KBL’s city-centre offices. 

An ultimate beneficial owner (UBO) is defined as an individual who directly or indirectly, owns or control, a legal entity, assuming that a shareholding of 25 % plus one share or an ownership interest of more than 25 % in the entity shall be an indication of ownership. Notifying the register of beneficial owners (RBO) has to be carried out until 31st August for entities incorporated before the 1st of March and within one month from the establishment of an entity or after a change in its status for entities incorporated after the 1st of March. A secure website has been created to enable this process via the Luxembourg Business Register. Once the submission posted by the entity, the administrator of the RBO then has three days to publish the information.

Every registered entity is concerned: SA, SARL, SCA., firms with stock traded on a regulated market, common/special limited partnerships, civil partnerships, cooperative companies, GIE, branches, investment funds (FCP), ASBL and more. Only individual traders are exempt. Accurate, complete and up-to-date information must be provided to the RBO under the liability of the board of the Luxembourg entity. Potential sanctions for non-compliance are tough, with fines going from €1,250 to €1,250,000.

Gaining a clear picture of the complete structure of the entity can be a complex process for the board. For example, an owner might be listed on an exchange, but a substantial share of the equity might be privately held and not free floating. Alternatively, an under-age minor might be a shareholder in a family company, but with a major of age effectively taking ultimate responsibility for voting decisions. “Due diligence needs to be conducted, with a review of corporate documents including shareholder agreement or joint venture agreement, as the case maybe” Ms Prunier noted. 

Where no individual owning or controlling the entity as explained above is evidenced as UBO, the beneficial owner is considered to be the principle manager, that is the people exercising management control. Ms Prunier explained that the RCS in Luxembourg has specified that all the board members must be declared in the RBO, not just the chair or senior members. “As board member or company secretary, you will be in charge to collect and upload personal data on the RBO. Saying that, I would highly recommend you to obtain the prior confirmation, even in writing, from any person to be declared in the RBO (either as UBO or as principle manager), of his/her acknowledgement of the structure and agreement to disclose his/her personal data ”.

Information about the UBOs is recorded via the RBO’s website. This includes basic identity data (name, personal or professional, address, date and place of birth national identification number, and the nature and scope of the interests held). For Luxembourg listed entities on the Luxembourg or on an EU stock exchange market, only details about where their stock is traded are needed. Supporting documentary pdfs are required and should be uploaded together with the submission. This information must be held by the RBO and by the registered entity for five years after deletion of the entity registered with the RCS. 

Different parties can access all or some of this data. As from 1st of September, anyone can log on see basic information excluding private/professional address and national/foreign ID number. Full access is available to national authorities (e.g. the prosecutor, investigating judges, judicial police, regulators, tax administration) but only in the performance of their duties. 

Disclosure can be limited in exceptional circumstances for a limited period if the UBO is at disproportionate risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation or where the UBO is underage or incapacitated. 

Ms Prunier ended her presentation with a practical demonstration of how to upload the necessary information. She also reminded participants that keeping this information up-to-date is an on-going process, with particular care needed if there are any change in the final ownership of the structure (e.g. mergers, spin offs, new joint ventures). “Address the content of the RBO Law and its implications for the company and its board members as an agenda item for board and shareholders’ meetings, approve the documentation necessary for the filing and keep it as an item of the agenda on a regular basis like a compliance check,” she recommended.