Disclosure of the structure of beneficial owners

On December 29, 2022, the Law of Ukraine “On Amendments to Certain Laws of Ukraine on Improving the Regulation of Ultimate Beneficial Ownership and the Ownership Structure of Legal Entities”, adopted on September 06, 2022, comes into force.

The main changes introduced by the new Law:

1) The requirement for annual confirmation of information about beneficiaries and the structure of beneficial ownership has been canceled

Now a legal entity is obliged to submit such information only when changes occur.

Also, the requirement to provide documents confirming the identity of the beneficiary is canceled when performing registration actions that are not directly related to changing information about beneficiaries.

2) Obligations are imposed on the participants of a legal entity to provide information to identify beneficial owners

Participants of a legal entity, both individuals and legal entities, are obliged to notify the legal entity of changes in information that may cause changes in information about the ultimate beneficial owner and / or ownership structure of the legal entity within 5 working days from the date of occurrence of such a change.

3) The obligation of legal entities to keep information about the ultimate beneficial owner and ownership structure of the legal entity up to date has been defined, in particular:

3.1. Notify the state registrar of changes within 30 working days from the date of their occurrence and submit documents confirming such changes to the state registrar.

It is important that legal entities that violate such requirements due to failure to receive a response to a request for information necessary to enter or update data in the Unified State Register are exempted from liability for such a violation.

Therefore, if a legal entity can confirm that it has approached the participants with a request to provide information necessary to determine the beneficial owners and has not received a response, or the response received does not allow updating information on beneficial owners in accordance with the requirements of the Law, such a legal entity will be released from responsibility. However, in this case, we see a significant possibility that the activities of such a legal entity may be blocked due to the blocking of bank accounts.

3.2. If a legal entity detects incompleteness, inaccuracies or errors in the information previously submitted to the state registrar about the ultimate beneficial owner and / or ownership structure of the legal entity, such a person is obliged to submit corrected information to the state registrar no later than 3 working days from the date of their discovery.

4) It is determined that information on the ultimate beneficial owner and / or ownership structure of a legal entity can be provided in paper or electronic form using an electronic digital signature.

5) The requirement for notarization of copies of documents proving the identity of the beneficial owner remains. It seems that copies of such documents can be certified by means of a qualified electronic signature.

6) A requirement is introduced for the relevance of certification of documents proving the identity of the beneficial owner – no more than 3 months before the date of submission of the document for state registration.

7) A new procedure for verifying information on beneficial owners is being established and state registrars are vested with broad powers.

Verification of the information provided by the legal entity in the explanations and documents provided to confirm information about the ultimate beneficial owner and / or ownership structure of the legal entity begins within 10 working days from the date of receipt of the explanation and is carried out by the state registrar in the manner established by the Ministry of Justice of Ukraine as agreed with subjects of state financial monitoring.

To verify information, the state registrar has the right to demand from individuals and legal entities:

– providing information (including explanations) necessary to establish the ultimate beneficial owner;

– providing copies of documents;

– access to the premises of a legal entity, to inspect things and documents at the location of legal entities.

8) Updating data on the ultimate beneficial owners of a legal entity in accordance with the new requirements is carried out no earlier than 90 days from the date of termination of martial law in Ukraine

Legal entities must update information on the ultimate beneficial owner within 6 months from the date of entry into force of the Regulation on the form and content of the ownership structure and the Methodology for determining the ultimate beneficial owner by a legal entity, which should be developed in the near future, but not earlier than 90 days from the date of termination or the cancelation of martial law in Ukraine.

That is, until the end of martial law in Ukraine, legal entities are not required to update information on beneficial owners. However, in order to avoid blocking the company’s activities by banks and to avoid counterparties refusing to cooperate, we recommend that in case of changes in information about beneficial owners, submit such information for state registration.