Mandatory disclosure of beneficiaries
The following information applies to all legal entities registered in Ukraine, as well as all individuals who are beneficial owners of Ukrainian legal entities, regardless of their organizational and legal form.
OnJuly 11, 2021 anOrder of the Ministry of Finance of Ukraine No. 163 “On Approval of the Regulation on the form and content of the property structure” dated 19.03.2021 entered into force (hereinafter referred to as the “Regulation”).
Within 3 months from the effective date, ALL legal entities must update the information on beneficiaries in the Uniform State Register and submit for registration their ownership structure form – that is until October 11, 2021.
The form of ownership structure is registered as a scheme in any form, taking into account the requirements and recommendations developed by the Ministry of Finance of Ukraine. Samples of the schematic representation of the property structure are made public on the official website of The Ministry of Finance of Ukraine1.
The Form shows all persons who directly or indirectly own a legal entity by themselves or jointly with others. The ownership structure indicates the participation size of each of the owners, as well as persons who, regardless of formal ownership, have the ability to significantly influence the management or operations of the legal entity.
Next, we would like to draw attention to the basic requirements for the identification of beneficiaries and recall the procedure for registering the update of such information2.
Please be reminded that on April 28, 2020, the Law of Ukraine “On Prevention and Counteraction to Legalization (Laundering) of Proceeds of Crime, Terrorist Financing and Financing Weapons of Mass Destruction Proliferation” № 361-IX dated 06.12.2019 entered into force. This law, among other things, made a number of changes to the Law of Ukraine “On state registration of legal entities, physical persons – entrepreneurs and public formations”, in particular regarding the order of maintaining and confirming information about the beneficial owners of companies.
- “Beneficiary” as a concept
«The final beneficial owner» (hereinafter referred to as the “beneficiary”) – is any natural person exercising decisive influence (control) over the activities of a legal entity (including through a chain of control/ownership).
The beneficiary may be identified through a sign of direct or indirect ownership, information about which is entered into the Registry.
The sign of direct influenceis the direct ownership by an individual of at least 25% of the share capital or voting rights in a legal entity.
Signs of indirect influenceon the activity may include the following:
- holding shares in the amount of no less than 25% of the share capital or voting rights in a legal entity through related individuals or legal entities;
- exercising decisive influence through control, possession, use or disposal of assets (in whole or in part);
- the right to receive income from the activities of a legal entity;
- the right of decisive influence on the formation of the members, the results of voting of the management bodies, as well as the execution of transactions that enable to determine the basic conditions of economic activity of a legal entity, to make binding decisions with a decisive influence on the activities of the legal entity, regardless of the formal ownership.
A legal entity may have one or more beneficiaries. Their number is unlimited.
However, it is defined that a person having a formal right to 25 percent or more of the share capital or voting rights in a legal entity that is a commercial agent, nominee or intermediary with respect to such right may NOT be a beneficiary.
- Procedure for confirmation (actualization) of data on beneficiaries
The information on the beneficiaries must include:
- full name, date of birth;
- country of citizenship, passport series and number;
- place of residence;
- registration number of taxpayer registration card (if any);
- full name and identification code (for residents) of the founder of the legal entity in which this person is the beneficiary;
- nature and extent (level, degree, proportion) of beneficial ownership (benefit, interest, impact)
In all cases of registration of changes of beneficiary or data about them, this information must be accompanied by the following package of documents:
- statement and ownership structure (in the form established by the Cabinet of Ministers);
- extract from the commercial register or other document confirming the registration of a non-resident legal entity in its country of residence (in case the founder of the legal entity is a non-resident legal entity);
- Such an extract must contain up-to-date information, while its validity is indefinite, as stated in the Letter of the Ministry of Justice of Ukraine from 23.04.2020 № 3887/8.4.4/32-20 “On providing information about the ultimate beneficiary owners”3, hereinafter – «the Letter».
- a notarized copy of the beneficiary’s identity document:
- notarized copy of an ID-document means that such copy is made from the document itself with certification by apostille/legalization. If the document is in a foreign language, the certified copy of the document must be translated into Ukrainian and notarized.
Only pages on which the document details, surname, first name, patronymic (if any) of the person to whom it is issued (as indicated in the Letter) must be submitted.
- notarized copy of the ID-document is not required if it is issued using the means of the Unified State Demographic Register – for residents and citizens of Ukraine.
Registration of information about beneficiaries (with submission of the specified package of documents) is mandatory in the following cases:
- within 3 months from the date of approval of the forms by the Cabinet of Ministers (until October 2021);
- annually, starting from the next year after the date of registration of the legal entity, within 14 calendar days from the date of such registration. In other words, if the company is registered on May 01, 2019, the “annual” package of documents will need to be submitted between May 01 and May 14, 2021, as stated in the Letter;
- in case of change of information on beneficiaries within 30 business days from the date of change;
- in case of detection of incompleteness or inaccuracy in the information about the beneficiaries in the Registry within 3 working days from the moment of detection.
In other cases of registration of changes about the company (codes, charter, address, etc.), the package of documents is submitted only if the information about the beneficiaries changes, as explained by the Ministry of Justice4.
- Liability for failure to report beneficiary information
Violation of the requirements for registration of information on beneficiaries, including untimely or incomplete registration of such information, shall entail bringing the persons of enterprises and organizations to administrative responsibility in the form of a fine: from 17 000 UAH to 51 000 UAH (art.166.11 of the Code of Administrative Offenses).
Protocols on these violations will be drawn up by authorized officials of the Ministry of Justice of Ukraine.
Should the subjects of primary financial monitoring (banks, insurance companies, notaries, accountants, etc.) detect discrepancies between the information on beneficiaries in the Registry and the actual data, they must refuse service and report this to the Ministry of Justice5.
The Registrar will notify the Ministry of Justice should they find that a legal entity fails to submit information on its beneficiaries in a timely manner.
In these cases, the notification of the Ministry of Justice about the violation of the procedure for registering information about the beneficiaries will be grounds for imposing a fine on the official of the company.
2 We previously described the requirements and procedures for identifying beneficial owners in the Legal Advice on Controlling Beneficial Owners ( continued Legal Advice on Financial Monitoring) dated April 29, 2020.
5 As well as other authorized bodies of state financial monitoring