The Belgian UBO-Register and obligations for corporate entities

The Belgian UBO-Register and the obligations for corporate entities within the framework of the Law for the prevention of money laundering and terrorist financing: here’s what you need to know.

1. The new legal framework regarding the prevention of money laundering and terrorist financing

Directive 2015/849 of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (hereinafter: “the Directive”), also known as the fourth Anti-Money Laundering Directive, introduces (amongst other things) new obligations for all corporate and other legal entities, i.e. companies, (international) not-for-profit associations, foundations and trusts. Furthermore, the Directive puts a new register, the ‘UBO-Register’, into place. These modifications fall under the framework of the prevention of and the combat against money laundering and terrorist financing.

The Belgian legislator transposed the Directive by means of the Law of 18 September 2017 for the prevention of money laundering and terrorist financing and for the limitation of the use of cash (hereinafter: “the Law”), published in the Belgian Official Gazette on 6 October 2017 and which entered into force on 16 October 2017. This Law replaces the Belgian Law of 11 January 1993 for the prevention of the use of the financial system for the purpose of money laundering and terrorist financing.

The Law introduces several new articles in the Belgian Companies Code and in the Belgian Law of 27 June 1921 concerning the not-for-profit associations, the foundations and the European political parties and foundations. These articles impose (new) obligations on companies, (international) non-for profit associations and foundations to collect and retain information on their Ultimate Beneficial Owners (hereinafter: “UBO”) and to transfer that information to the UBO-Register.

Recently, the Royal Decree of 30 July 2018 regarding the operating modes of the UBO-Register (hereinafter: “the Royal Decree”) has been published in the Belgian Official Gazette on 14 August 2018 and contains the detailed and operational provisions of the UBO-Register. The Royal Decree will enter into force on 31 October 2018.

2. The UBO-Register

The UBO-Register is a database that shall be created by each Member State with a view to organizing and structuring certain information regarding UBOs in an efficient way. The register centralizes adequate, accurate and current information on the UBOs of corporate and other legal entities operating in their territory. It will enable competent authorities to identify criminals who might potentially conceal themselves behind a corporate structure. The institution responsible for the UBO-Register in Belgium is the General Administration of the Treasury of the Federal Public Service Finance.

The UBO of a corporate or other legal entity is linked to the national UBO-Register of the country in which it is incorporated. This implies that the Belgian UBO-Register will in principle only contain information on UBOs of Belgian corporate and other legal entities.

Belgian corporate and other legal entities have to upload certain information on their UBOs to the UBO-Register by 30 November 2018 at the latest. Companies have to declare, amongst others, the name, date of birth, nationality and address of each UBO, together with the details on the economic interests held by that UBO, whether the conditions are met by one person individually or several persons jointly and whether it concerns a direct or indirect UBO. Similar information must be provided by (international) not-for-profit associations, foundations and by trustees and trust managers.

The aforementioned information needs to be uploaded into the UBO-Register within a month of the information regarding the UBO becoming known or changing. Directors of entities who do not comply with this obligation are subject to criminal fines starting from 50 EUR to 5 000 EUR (to be multiplied by 8).

3. Who is the UBO?

The UBO is/are the natural person(s) who ultimately own or control a company, (international) not-for profit association or a foundation, the agent thereof, the beneficiary of a life insurance agreement and/or the natural person(s) on whose behalf a transaction is being conducted or a business relationship is entered into. The UBO is determined based on the type of entity. The Law puts a cascade-system into place for the identification of the UBO of companies. For (international) not-for-profit associations, foundations and trusts, a list of possible UBOs is provided.

Companies

A UBO of a company can be considered:

1. the natural person(s) who has/have a direct or indirect ownership of a sufficient percentage of the voting rights or ownership interest in the company, including through bearer shares. If a natural person owns more than 25% of the shares, voting rights or capital of the company, he/she will be assumed to have a sufficient percentage of the voting rights or direct ownership interests. An indication of indirect ownership is a situation whereby one or more companies that are controlled by one or more of the same natural persons have at least 25% of the shares or capital in the company that is determining its UBO. In this case, the natural person(s) controlling the company that has/have an interest in the company determining its UBO, will be considered as UBO;
    

2. the natural person(s) who has/have control over the company through other means. These other means can be determined based on the criteria foreseen in Article 22, (1) to (5) of the Directive 2013/34/EU on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings; in short the Accounting Directive. Examples are the natural person(s) who, as shareholder, has/have the right to appoint or remove a majority of the members of the administrative, management or supervisory body.

In the event that neither categories apply to one or more UBOs nor is there grounds for suspicion, a third step in the identification process has to be applied. This third step will appoint the natural persons holding a position as senior managing official of the company as the UBOs. This does not mean that all the persons holding a position as senior managing official will be considered as UBO; only those who lead the company and can in practice exercise the most decisive influence on the management of the company will be named as UBO. In Belgium, this will most likely be the CEO or the president of the Management Committee.

Foundations

The UBO of a foundation is easier to determine. The Law sums up several potential UBOs by referring to the Law of 27 June 1921 concerning the not-for-profit associations, the foundations and the European political parties and foundations. There are five categories of possible UBOs in foundations: the directors, the natural persons charged with the day-to-day management of the foundation, the founders of the foundation, the (class of) persons in whose main interest the foundation is set up or operates and finally any other natural person exercising ultimate control over the foundation by other means.

(International) not-for-profit associations

The UBO of an (international) not-for-profit association is determined in a comparable way as the UBO of a foundation. The main difference is that the founders of an (international) not-for-profit association can, contrary to the founders of a foundation, cannot be considered as UBO. The rationale of the legislator behind this difference is that the founders of associations are, after a certain period of time, less likely to be a member of the association since associations normally exist for a long period of time during which several successive generations of members and directors will be part of the association. Consequently, the founders who are no longer part of the association can hardly be considered an UBO.

A second difference with the UBOs of a foundation is the fact that the natural person(s) who can represent the association will also be considered as an UBO.

Trusts

For trusts, the potential UBOs are determined in the Law as well. More specifically, the settlor, trustee(s), the protector (if any), the beneficiaries or where the individuals benefiting from the legal arrangement or entity have not yet been determined, the class of persons in whose main interest the legal arrangement or entity is set up or operates and, finally, any other natural person exercising ultimate control over the trust by means of (in)direct ownership or by other means are to be considered as UBO of a trust.

4. Who can access the UBO-Register?

In principle, the information regarding the UBOs of companies contained in the UBO-Register is accessible by (i) the competent authorities, (ii) the so-called obliged entities, such as financial institutions, notaries and lawyers, in light of their compliance with the obligation of vigilance with respect to their clients and (iii) every citizen.

The information regarding the UBOs of (international) not-for-profit associations, foundations and trusts is accessible (i) by the first two aforementioned categories, (ii) every other person or organization showing a legitimate interest and (iii) every other person or organization making a written request for an (international) not-for-profit organization, foundation or trust which has control over a company, (international) not-for-profit association or foundation.

Access granted to citizens, persons showing a legitimate interest or making a written request is to a certain extent limited; for example they do not have access to the address of the UBO.

Finally, in certain exceptional circumstances, such as the risk of fraud, blackmail, extortion and kidnapping, the UBOs themselves can request the General Administration of the Treasury of the Federal Public Service Finance to limit access to part or all of their information included in the UBO-Register.

5. How to prepare?

With the deadline for uploading the required information in the UBO-Register slowly approaching (30 November 2018), and pending the online availability of the UBO-Register, it is advisable to already take the following preparatory measures:

• Ensure that a legal representative or proxy holder with an e-ID can supplement the required information in the name of the organization on the electronic platform MyMinFin;

• Collect adequate and extensive information on your UBOs and of all other legal entities of which your UBOs make use to exercise control over your organization;

• Collect documentary evidence demonstrating that the information is sufficient, accurate and actual;

• Set up procedures within your organization to ensure that any change to the information regarding your UBOs can be communicated to the UBO-Register within one month.

For further updates on this topic please consult this website or feel free to contact us for any advice and/or assistance.

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