Irish Companies must investigate ownership structure to fulfil new obligations
With effect from 15 November 2016 most Irish companies are obliged to obtain and hold information about their beneficial owners. This is because of the early transposition of certain provisions of the Fourth Money Laundering Directive ((EU) 2015/849) ("4MLD") into Irish law by the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2016 (the "Regulations").
These new obligations require immediate action.
What is a relevant entity?
The Regulations apply to every company or other legal entity incorporated in Ireland (a "Relevant Entity"). The Regulations do not apply to a company listed on a regulated market and subject to disclosure requirements consistent with EU law or subject to equivalent international standards that ensure adequate transparency of ownership information ("Exempt Entities").
Express trust structures governed by Irish law are expected to become subject to beneficial ownership disclosure requirements. These provisions of 4MLD have not been transposed into Irish law yet.
Who is a beneficial owner?
A "beneficial owner" is defined in 4MLD as the natural person who ultimately owns or controls in excess of 25% of the Relevant Entity. This may be through direct or indirect ownership of shares or ownership interests (for example by controlling voting rights). It also includes control via other means (for example through one or more corporate entities which together hold over 25%), other than via an Exempt Entity.
Obligations of a Relevant Entity
The Regulations require a Relevant Entity to take all reasonable steps to obtain and hold basic specified information in respect of its beneficial owners on a beneficial ownership register ("Register"). A Relevant Entity that is not aware of the names and particulars of its beneficial owners must take steps to get this information. The Regulations provide that this can be done by serving notice on certain persons.
The types of notice are:
(a) to a potential beneficial owner, requiring that person to say whether they are a beneficial owner or not;
(b) to a person who may know who the beneficial owner is, requiring that person to disclose that information; and
(c) to a beneficial owner whose particulars are recorded on the Register, asking that person to disclose any changes to those particulars.
If, having exhausted all possible means, no natural persons are identified as being the beneficial owners, or if there is any doubt that such natural person is a beneficial owner, the Relevant Entity must list its directors and chief executive officer in its Register.
Obligations of beneficial owners
In certain circumstances, set out in the Regulations, a beneficial owner is obliged to notify the Relevant Entity of his or her status as a beneficial owner, if he or she ceases to be a beneficial owner or if his or her particulars change.
Impact on Investment Funds
Investment companies and Irish collective asset-management vehicles ("Investment Funds"), Irish UCITS management companies and Irish AIFMs are all Relevant Entities. However, Investment Funds established as umbrella funds need only enter beneficial owners in their Register where they own/control (directly or indirectly) in excess of 25% of shares across the umbrella as a whole (not per sub-fund).
It is an offence for a Relevant Entity or beneficial owner to fail to comply with obligations under the Regulations.
The remaining provisions of 4MLD are expected to be transposed into Irish law in June 2017. When this happens the information on beneficial ownership of Relevant Entities must be accessible by competent authorities, financial intelligence units, entities carrying out customer due diligence under 4MLD and others with a legitimate interest via access to a central register yet to be established.
It is unclear whether the central register will be publicly accessible but it is understood that the European Commission is currently considering this.
What actions should Relevant Entities take?
Relevant Entities must now take the steps set out in the Regulations to obtain and hold information about their beneficial owners.
We can advise Relevant Entities in relation to the creation and maintenance of the Register. We can also assist in preparing the appropriate notices under the Regulations and with other matters required in order for Relevant Entities to fulfil their legal obligations.