On 18 December 2018, the bill of law 7217 setting up a register of BOs of Luxembourg legal entities (the so-called “RBE”) has been passed in Parliament. The new law on the register of beneficial owners will enter into force on the first day of the second month following its publication in the Luxembourg Official Journal (i.e. presumably on 1 February 2019) (the “RBE Law”).
The RBE Law implements the new transparency measures provided for by Directive 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (the “4th AML Directive”), and already anticipates the changes brought to the 4th AML Directive by the new EU Directive 2018/843 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (the “5th AML Directive”) (Newsflash of 22 November 2018 here).
It should be noted, at this stage, that the bill of law 7216b which relates to the requirement to set up a register of BOs of Luxembourg fiduciary arrangements has not yet been passed before parliament although, in view of the last amendments by the Luxembourg government in October 2018 (which also already take into account some of the changes brought by the 5th AML Directive to this register) this text could also be described now as entering the final stage of such legislative process. This law should thus swiftly follow the RBE Law. The law relating to the internal file on fiduciary arrangements was passed on 21 August 2018 (Newsflash of 23 August 2018 here).
The present newsflash aims at setting out the main features of the RBE Law, which will impact not only professionals subject to anti-money laundering and counter terrorism (“AML- CTF”) obligations under the law of 12 November 2004 on the fight against money laundering and terrorist financing, as amended (the “2004 Law”) but more generally a large number of entities registered with the Luxembourg trade and companies register (Registre de Commerce et des Sociétés du Luxembourg, the “RCSL”).
1. Scope of the RBE Law
All Luxembourg commercial companies as well as any other legal entities registered with the RCSL fall within the scope of the RBE Law.
This includes, among others, the following types of entities: public limited companies (sociétés anonymes), private limited companies (sociétés à responsabilité limitée), partnerships limited by shares (sociétés en commandite par actions), common limited partnerships (sociétés en commandite simple), special limited partnerships (sociétés en commandite spéciale), foundations, civil companies, interest groupings (groupements d’intérêt économique - GIE), European interest groupings (groupements européens d’intérêt économique - GEIE), and investment funds (fonds d’investissement). Since the latest governmental amendments, all mutual funds (fonds communs de placement - FCPs) and branches of foreign companies also fall within the scope of the RBE Law (together with all the entities listed above, the “Subjected Entities”).
Listed companies are also, to a certain extent, subject to the RBE Law.
2. Obligations set out by the RBE Law
2.1. Definition of BO
First and foremost, it should be noted that the obligations contained in the RBE Law relate to BOs of the Subjected Entities which are defined by reference to the 2004 Law, i.e. any natural person(s) who ultimately owns or controls the customer or any natural person(s) on whose behalf a transaction or activity is being conducted.
The 2004 Law further specifies that in the context of this definition, the following persons shall be considered as BOs:
“Any natural person who ultimately owns or controls a legal entity through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interest in that entity, including through bearer shareholdings, or through control via other means, other than a company listed on a regulated market that is subject to disclosure requirements consistent with European Union law or subject to equivalent international standards which ensure adequate transparency of ownership information.
A shareholding of 25% plus one share or an ownership interest of more than 25% in the customer held by a natural person shall be an indication of direct ownership. A shareholding of 25% plus one share or an ownership interest of more than 25% in the customer held by a corporate entity, which is under the control of a natural person(s), or by multiple corporate entities, which are under the control of the same natural person(s), shall be an indication of indirect ownership.
If, after having exhausted all possible means and provided there are no grounds for suspicion, no person under point (i) is identified, or if there is any doubt that the person(s) identified are the beneficial owner(s), any natural person who holds the position of senior dirigeant (manager).”
2.2. Obligation for Subjected Entities to set up an internal file on their BO
The Subjected Entities are themselves required to obtain and hold adequate, accurate and up-to-date information on the person(s) identified as their BO(s) at their registered office (the so-called “internal file”). The information to be kept in the internal file shall be the name and surname of the BO, his/her nationality, date and place of birth, country of residence, the exact private or professional address, national or foreign identification number (if applicable) and the nature and extent of the beneficial ownership held.
This information must be kept by the Subject Entities at their registered office, and must be duly documented with all relevant documentation (e.g. copy of the relevant ID card, share register, etc.). This information must be kept up-to-date by the Subjected Entities. In addition, this internal file must be made available to competent authorities upon their request (e.g. the public prosecutor, the Commission de Surveillance du Secteur Financier, the Commissariat aux Assurances, the tax administrations, etc.) (and at the latest within 3 days of their request), and to entities subject to AML-CTF obligations under the 2004 Law (e.g. credit institutions, professionals of the financial sector, insurance undertakings and UCITS management companies) within the framework of their customer due diligence measures (to the exception of the address and national or foreign identification number of the BO).
It should be noted that this information and documentation will have to be kept for five years after the winding-up of the Subjected Entity in a designated place.
2.3. Obligation to file BO-related information with the RBE
2.3.1. Information to be made available in the RBE
The information (and relevant documentation) contained in the internal file is required to be uploaded in the RBE, which is maintained by the Luxembourg business registers GIE (the “LBR”) (formerly the RCSL GIE), within one month after the Subjected Entities have become aware or should have become aware of an event or circumstances which trigger the filing with the RBE. As is the case for the internal file, this information must be accurate, complete and up-to-date, and will be kept in the RBE for a period of 5 years after the winding-up of the Subjected Entities.
It should be noted that listed companies are only required to include in the RBE the exact name of the regulated market(s) upon which their securities are admitted to trading.
Any person having access to the RBE and becoming aware of incorrect or missing information is required to inform the RBE thereof without delay. The LBR will, as a consequence, require the Subjected Entity to update the information contained in the RBE accordingly.
2.3.2. Access to the RBE
The BO-related information contained in the RBE will be made available electronically to competent authorities for the purposes of their supervisory duties (e.g. the public prosecutor, the Commission de Surveillance du Secteur Financier, the Commissariat aux Assurances, the tax administrations, etc.), self-regulatory bodies (e.g. the Luxembourg bar council, Notary Chamber and the Institut des Réviseurs d’Entreprises), entities subject to AML-CTF obligations under the 2004 Law (e.g. credit institutions, professionals of the financial sector, insurance undertakings and UCITS management companies), but also any member of the public.
The access by the members of the public will, however, be slightly limited as they will not have access to the address and national or foreign identification number of the BO.
The Subjected Entities (or their BOs) may not be informed of any access to their information by competent authorities.
Any Subjected Entity (or its BOs) may request in writing a restriction of access to the information in the RBE relating to its BOs in certain exceptional circumstances (e.g. where such access would expose the BO to a disproportionate risk, a risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation, or where the BO is a minor or otherwise incapable). However, such restriction of access is subject to stringent conditions and, if granted, information to that effect will also be displayed in the RBE.
2.3.3. Functioning of the RBE
The filing of the BO-related information with the RBE is to be carried out in electronic form via the website of the LBR. Any incomplete filing (or filing which does not comply with the conditions of the RBE Law) shall be rejected by the LBR, which will require the Subjected Entity to rectify its request (by completing or amending the information provided to the LBR), within 15 days after the LBR has issued its request to that effect. Any request which still remains non-compliant with the relevant provisions of the RBE Law shall be rejected by the LBR through a duly motivated decision against which judicial proceedings may be filed in court.
2.3.4. Technical aspects relating to the RBE
The purely technical aspects relating to the RBE (including, for instance, the procedure for electronic filing with the RBE, the procedure for granting access to competent authorities or any other person, the research criteria, the fees paid to the LBR, supporting documents needed for an entry or amendment thereof, etc.) will be addressed by way of Grand-Ducal regulations which are not yet available at this stage (even in draft form).
2.4. Obligation for the BO to make available all relevant information to its Subjected Entity
In order to ensure the correctness and completeness of the information in the internal file and thus uploaded in the RBE, all persons qualifying as BO(s) are now subject to an obligation to provide the relevant Subjected Entity with all the necessary BO-related information (and documentation) in order for the latter entity to comply with its obligations under the RBE Law.
3. Sanctions for non-compliance with the RBE Law
The non-compliance by a Subjected Entity with the obligation to set up an internal file, or the provision of inexact or outdated information to competent authorities or entities subject to AML-CTF obligations under the 2004 Law, or the non-provision of the relevant information to the RBE is criminally sanctioned by a fine ranging between EUR 1,250 and EUR 1,250,000.
Failure by the BOs to comply with the obligation to provide the Subjected Entity with all necessary BO-related information is criminally sanctioned by a fine ranging between EUR 1,250 and EUR 1,250,000.
4. Grace period for the RBE Law
It is important to stress that Subjected Entities and their BO(s) will have up to 6 months after the entry into force of the RBE Law to comply with all of its provisions and any access to BO- related information may only be requested after such time period.
5. How can we help?
Arendt can assist you in understanding and complying with your new obligations as of the introduction of the RBE Law.
Our multi-disciplinary team of legal professionals, regulatory/compliance experts and corporate services specialists will provide you with a fully integrated solution customised to your set-up and specific requirements.
Our experts can help you in:
Identifying the Beneficial Owner(s) as defined by reference to the 2004 Law;
Analysing the possibility of requesting a restriction of access based on the exemptions provided by the RBE Law and, subsequently, preparing such request;
Preparing, gathering and maintaining the supporting documentation on the Beneficial Owners (“internal files”) as foreseen in the RBE Law;
E-filing of the Beneficial Owner(s) and related information with the RBE;
E-filing of a request for a restriction of access with the RBE.