Rules on beneficial owners: New, stricter requirements for management of companies and foundations have entered into force
On 10 January 2020, new rules on beneficial owners entered into force. The Act implements parts of the 5th Money Laundering Directive and, among other things, it tightens the obligation of companies, foundations and certain associations to collect, store and record information about their beneficial owners.
The new rules thus introduce a number of new obligations for both companies and foundations, as well as for their owners. Here, we focus on the new requirements that management should pay particular attention to.
Ongoing Commitments
The management of companies and foundations are required to continuously record changes in relation to the company's or the foundation's beneficial owners and the rights of these owners with the Danish Business Authority, as soon as possible after the management has become aware of such changes.
The new rules also require owners to provide the company or the foundation with the necessary information on the owner's ownership of the company or foundation in question on request.
Companies and foundations are also required by the new rules to disclose their ownership at the request of persons who perform know-your-customer procedures under the Money Laundering Act. In connection with the introduction of new rules on this, the Danish Business Authority has prepared a new guide on reporting beneficial owners, which can be read in full here.
More Rigorous Rules for Updating Information Annually
In addition to the obligation to continuously investigate and record changes to the company's beneficial owners, the new rules also require management to, at least once a year, examine whether there are changes in the registered information about their beneficial owners.
The results of this study must be presented at the meeting at which the annual report is approved.
Thus, for companies, the results of the annual survey will typically have to be presented at the board meeting that precedes the company's annual general meeting, where the annual report is to be approved. The annual examination should therefore be conducted prior to the holding of the company's annual general meeting.
We therefore recommend that the management investigates, in good time before the ordinary general meeting, whether and, if so, what changes have occurred to the company's beneficiary owners in relation to the registration of the company's beneficiary owners with the Danish Business Authority.
For foundations and associations that are not required to prepare annual reports, the results of the annual survey must be presented to the board on another occasion.
In addition, if the circumstances of the company or foundation so require, more than one annual survey of the beneficial owners of the company or foundation must be conducted.
Required Documentation
Furthermore, companies and foundations, etc. must, at all times, be able to document what has been done to identify its beneficial owners. The company must be able to document both their attempts to identify beneficial owners and the outcome of the investigation, including the extent of the owners' beneficial ownership. Both missing and inadequate documentation of beneficial ownership will be sanctioned.
We therefore recommend that up-to-date and adequate documentation regarding identification of the company's or foundation's beneficial owners is available to the management at all times.
Risk of Compulsory Dissolution in Case of Missing or Insufficient Documentation
Until now, the Danish Business Authority has had the option to decide on the compulsory dissolution of companies and foundations, if they had failed to register their beneficial owners.
In addition to this, the new rules allow the Danish Business Authority to compulsorily dissolve companies and foundations, etc. in cases where the documentation for identifying their beneficial owners does not exist or where the documentation is incomplete.
Thus, the new rules tighten the obligation to investigate, record and document changes to the beneficial owners of the company or the foundation, as failure to comply with the rules can result, among other things, in fines and compulsory dissolution.
In our opinion, the tightening of the rules means that the management of companies and foundations should be even more aware of measures regarding identification, updating and registration of beneficial owners.
For Further Information
Niels Walther-Rasmussen, Attorney-at-law, Partner
Telephone +45 3319 3722
Mobile +45 4010 0151
e-mail: nwr@mazanti.dk
Jens Ahrendt, Attorney-at-law, Associate Partner
Telephone +45 3319 3756
Mobile +45 4036 0536
e-mail: ja@mazanti.dk
and
Mette-Marie Uggerhøj, Junior Associate
Telephone +45 3319 3703
Mobile +45 5219 8095
e-mail: mmu@mazanti.dk
This newsletter does not constitute and cannot replace legal advice. Mazanti-Andersen Korsø Jensen does not take any responsibility for any damage or loss that directly or indirectly can be assigned to the use of the newsletter.