Compulsory notification on the ultimate beneficial owner of a legal entity in Ukraine to state registrar

On April 28, 2020 the Law of Ukraine “On Prevention and Counteraction to Legalization (Laundering) of Proceeds from Crime, Financing of Terrorism and Financing of the Proliferation of Weapons of Mass Destruction” (hereinafter – Law № 361-IX) came into force. According to the law, legal entities were obliged to submit information about the ultimate beneficial owner to the extent specified by the Law along with the ownership structure to the state registrar within three months from the date of entry into force of the regulatory legal act approving the form and content of ownership structure.

Accordingly, the Law of Ukraine “On State Registration of Legal Entities, Individual Entrepreneurs and Public Associations” (hereinafter – the Law on Registration) was amended and all newly created legal entities are obliged to submit information and documents on the ultimate beneficial owner to the state registrar within 14 calendar days  each calendar year following the year of registration of legal entity. Also entities should further notify the state registrar of any changes within 30 working days from the date of their occurrence and submit documents confirming these changes.

We reported about this in a previous article “Compulsory notification of the State Register about ultimate beneficial owner”

Form and Content of Ownership Structure is approved, countdown started

On June 11, 2021, the Government Courier published Order of the Ministry of Finance of Ukraine # 163 of March 19, 2021 “On Approval of the Regulations on the Form and Content of Ownership Structure” (hereinafter – Order № 163), which enters into force July 11, 2021, and therefore the specified period of 3 months will finally begin its countdown from 12.07.2021.

According to Order 163, the ownership structure by form is an official document that is a schematic representation of the ownership structure of a legal entity, showing all persons who directly or indirectly own this entity alone or jointly with other persons or regardless of formal ownership have the ability to significantly influence the management or activities of the legal entity.

Samples of the schematic representation of the ownership structure are published on the official website of the Ministry of Finance.

The beneficiary about whom detailed information should be provided

The Law # 361-IX, according to which the Order 163 was adopted, stipulates that the ultimate beneficial owner is:

for legal entities – any natural person who has a decisive influence on the activities of a legal entity (including through the chain of control) is the beneficiary in respect of which detailed information must be submitted;

for trusts – the founder, trustee, defender (if any), beneficiary (beneficiary) or group of beneficiaries (beneficiaries), as well as any other individual who has a decisive influence on the activities of the trust (including through the chain of control / ownership );

for other legal structures – a person who has a status equivalent to or similar to the persons specified for trusts. 

Indications of direct decisive influence on activity is the direct ownership by a natural person of a share in the amount of not less than 25 percent of the authorized capital or voting rights of a legal entity.

Indications of indirect decisive influence on the activity is the possession by an individual of a share of at least 25 percent of the authorized capital or voting rights of a legal entity through related natural or legal persons, trusts or other similar legal structures, or exercising decisive influence by exercising control rights, possession, use or disposal of all assets or their share, the right to receive income from the activities of a legal entity, trust or other similar legal structure, the right to decisive influence on the formation, voting results of governing bodies, as well as transactions that determine the basic conditions economic activity of a legal entity, or the activity of a trust or other similar legal structure, to make binding decisions that have a decisive impact on the activities of a legal entity, trust or other similar legal entity, regardless of formal ownership.

In this case, the ultimate beneficial owner may not be a person who has a formal right to 25 percent or more of the authorized capital or voting rights in the legal entity, but is a commercial agent, nominal owner or nominal holder, or only an intermediary for such a right.

That is, despite the reflection in the ownership structure of all persons who directly or indirectly own a legal entity, the application form provides information only about those persons who meet the definition of the ultimate beneficial owner, enshrined in Law # 361-IX and the document specified in the law is given only in relation to this person (persons).

List of documents to be submitted

According to Art. 17-1 of the Law on Registration to confirm information about the ultimate beneficial owner of the legal entity, the following documents are to be submitted:

  1. application for confirmation of information on the ultimate beneficial owner (form 6);
  2. ownership structure according to the form and content determined in accordance with the legislation;
  3. an extract, certificate or other document from the commercial, banking, court register, etc., confirming the registration of a non-resident legal entity in the country of its location – if the founder of the legal entity is a non-resident legal entity;
  4. a notarized copy of the document certifying the person who is the ultimate beneficial owner of the legal entity for a non-resident individual and, if such a document is issued without the use of the Unified State Demographic Register (book format passport issued before July 2016) for a resident individual.

Additional documents required in some cases

The Order also stipulates that in certain cases, it may be necessary to submit additional documents with regards the ownership structure.

Thus, if there are foreign legal entities and / or persons who are not citizens of Ukraine and are citizens (subjects) of another state or states, trusts, and or other similar legal structures in the ownership structure of the legal entity, official documents are to be submitted (their copies, in particular notarized copies) confirming the ownership of these persons, trusts and / or other similar legal entities of corporate rights in a legal entity, except when information about the relevant entities is available in the Unified State Register of Legal Entities, Individuals persons – entrepreneurs and public formations.

If there is a final beneficial owner in the ownership structure of a legal entity, information on the possibility of exercising a decisive influence on the management or the activities of the legal entity are not clearly tracked according to the Unified State Register, to carry out the registration action in the package of documents together with the ownership structure the schematic representation of the ownership structure must also be accompanied by official documents (copies, including notarized copies), confirming the ability to exercise decisive influence on management or activities of the legal entity by control / possession.

In particular this can be:

  • a contract of sale or gift of corporate rights (shares in the authorized capital); 
  • the decision of the general meeting of participants (the decision of the sole participant) of the legal entity to determine the size of the authorized (composed) capital and the size of the shares of the participants; 
  • the act of acceptance-transfer of a share (part of a share) in the authorized (composed) capital of a legal entity; 
  • account statement in the depositor’s securities;  
  • statement of account in the securities of the nominal holder; 
  • property management agreement; trust agreement; 
  • trust declaration and / or agreement; 
  • marriage certificate; 
  • extract or other document from an official source, including trade, banking, court register; 
  • other documents confirming the exercise of decisive influence (control) on the activities of the legal entity.

Can a limited liability company not have beneficial owners?

We are awaiting clarification from the Ministry of Justice on this issue. To date, the practice is such that registrars do not require information on beneficial owners in the case when the shareholders of a limited liability company are joint stock companies (both Ukrainian and foreign) and non-profit organizations.

Procedure of submitting documents

The application and documents are submitted in paper or electronic form, in person (representative) or by post. In the case of filing an application for state registration by post, the authenticity of the applicant’s signature must be notarized.

In the case of the application of documents not by the head of the legal entity, or the case of creation not by the founder (another person authorized by the meeting), the documents are also accompanied by the original (notarized copy) of the document certifying the authority of the representative such as power of attorney (unless information about the authority of this representative are contained in the Unified State Register).

Regarding the amount of the administrative fee for submitting information on the ultimate beneficial owner, if the legal entity submits documents within the above three-month period, the administrative fee is not charged. In case of simultaneous changes to the Unified State Register of the legal entity or expiration of three months from the date of entry into force by a normative legal act approving the form and content of the ownership structure, the administrative fee will be levied for the sum of the amount established by Article 36 of the Law on Registration (0.3 of the subsistence minimum for able-bodied persons, which amounts to UAH 714 in 2021).

Сonsequences the company would suffer if it fails to comply with the law?

The Code on Administrative Offences of Ukraine shall impose a fine on the manager(s) of a company which fail to comply with above mentioned requirements. The amount of fine is between 1000 to 3000 non-taxable minimum incomes (means 17 000,00-51 000,00 UAH).

Laudis Legal&Accountancy is always ready to provide qualified professional assistance and accompany you in the procedure of notifying the state registrar about the ultimate beneficial owners.


Galina Bastieieva

Counsel
Laudis Legal & Accountancy