On October 14, 2014 the Parliament of Ukraine passed the Bill "On Amendments to Some Legislative Acts of Ukraine on Determining Ultimate Beneficiaries of Legal Entities and Public Figures" No.5114 dated 30.09.2014 into law (hereinafter, the Law)3.
The Law amends the Commercial Code of Ukraine, the Code of Administrative Offences of Ukraine, the Law of Ukraine "On prevention and counteraction to legalization (laundering) of proceeds from crime or terrorism financing," "On State Registration of Legal Entities and Individual Entrepreneurs," "On State Registration of Rights in Rem to Real Estate and their Encumbrances." The changes are aimed at establish- ing a mechanism for identifying individuals that are ultimate beneficiaries as well as free access to the State Register of Rights to Real Estate and their Encumbrances.
Basic provisions of the Law:
- Companies other than state and municipal ones are obliged to identify their ultimate beneficiary, to regularly update and store information about it and to provide it to the state registrar.
- An Ultimate Beneficiary shall mean an individual that is able to have a decisive influence on the man- agement or business activities of a legal entity either directly or through other entities, regardless of formal ownership. Such influence is exercised, in particular, by exercising the right of possession or use of all or a substantial share of assets, the right of a decisive influence on the formation of the composi- tion, voting results and performance of transactions enabling to determine the conditions of business activities, to give binding instructions or to perform functions of a governing board. Also, an individual is able to exercise influence by direct or indirect (through another individual or legal entity) ownership of shares in a legal entity in the amount of 25 or more percent of the authorized capital or voting rights in a legal entity by one entity independently or jointly with affiliated individuals and/or legal entities. In this case, an individual ultimate beneficiary of a legal entity may not be a person that is formally entitled to 25 or more percent of the authorized capital or voting rights in a legal entity, but is an agent, nominal holder (nominee) or is just an intermediary with respect to such rights.
- The USR should contain information about ultimate beneficiaries of legal entities, namely the full name (if any), country of nationality, series and number of his/her Ukrainian passport of a foreigner’s pass- port, place of residence, registration number of his/her taxpayer’s card (if any); as well as information about the ownership structure of the founders – legal entities (other than political parties, creative
- unions and their territorial units, bar associations, chambers of commerce, government agencies, lo- cal governments and their associations). At the same time, failure of heads of legal entities or persons authorized to act on behalf of legal entities (executive boards) to provide the above information to s state registrar will entail a fine in the amount of three to five hundred non-taxable minimum incomes of individuals.
- Also, the Law significantly expands the list of persons belonging to public figures within the meaning of the Law "On Prevention and Counteraction to Legalization (Laundering) of Proceeds from Crime or Terrorism Financing."
- Apart from that, information about registered rights and their encumbrances contained in the State Register of Rights to Real Estate and their Encumbrances is open and public under the Law. Any interested party may obtain information exclusively regarding a property in electronic form through the official Website of the central executive authority implementing the state policy in the field of state registration of rights. To obtain information about real estate, an application is filed with a state registration authority or a notary. Authorized state authorities and their officials as well as notaries obtain immediate access to the Register with the help of a digital signature. They may search for information in relation to both a property and a person enjoying the relevant right. Information about registered rights and their encumbrances obtained in electronic or paper form is official and is used in accordance with the law.
It is noteworthy that earlier registered companies are granted a 6-month grace period calculated from the date of entry into force of the Law, to provide data about their ultimate beneficiary (beneficiaries) to the state registrar.
The Law adopted by the Parliament is certainly a significant step forward and is necessary to implement anticorruption reforms. The Law is aimed at harmonizing the national law with acquis communautaire and other international regulations aimed at countering the laundering of criminal proceeds.
The Law has been submitted to the President of Ukraine for signature.