On 1 March 2016, the Danish Parliament passed a bill to amend the Danish Companies Act, the Act on Certain Commercial Undertakings, the Act on Commercial Foundations and numerous other acts. The amendment involves an obligation for all of the companies, businesses, funds etc. included once the amendment enters into force to retain information about their “real owners” and to register these in the Danish Business Authority’s IT system, which will make the information publicly available. Furthermore, the amendments will result in a duty to disclose such information to the Danish Public Prosecutor for Special Economic Crimes (SØIK).
The Act aims to intensify the effort against tax havens and implementation of precautionary measures against employment of the financial system for purposes of money laundering and financing of terrorism.
As the amendments require changes to various IT systems, the date on which the amendments will enter into force is unknown. The Ministry of Business and Growth will determine the specific date on which the regulations will enter into force.
Reporting of certain Capital Possessions (the legal Owner)
Currently, companies covered by the Danish Companies Act (public limited companies, private limited companies, entrepreneur companies and limited partnership companies) and SEs are obligated to report information to the Public Shareholders’ Register on natural and legal person who hold 5% or more of the company’s’ voting rights or share capital.
The information in the Public Shareholder’s Register is publicly available after reporting. This obligation will remain unchanged in full force and effect. There has also been established access to conclude similar obligations for owners of businesses subject to the Act on Certain Commercial Undertakings (e.g. limited partnerships) except one-man businesses, but this access has yet to be exercised.
The passing of the new regulations does not change this reporting obligation, and the above-mentioned companies will thus continue to obtain and report this information.
The new reporting Obligation
Additional Subjects of Duties imposed
The new regulations of reporting real owners do not only apply for the above-mentioned companies (public limited companies, private limited companies, entrepreneur companies, limited partnership companies and also SEs and SCEs) but also to a number of other companies and businesses. The table below is an overview of the legal entities which are subject to the new reporting obligation:
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Publicly traded companies are exempt from the reporting obligation as they are subject to disclosure requirements which already ensure sufficient transparency in the ownership of the companies.
The legal entities included must obtain information from their real owners and report these to the Danish Business Authority, which subsequently will make this information available to the public through the Public Shareholder’s Register. It is expected that all information about real owners, except for confidential information such as civil registration numbers and the like, will be publicly available.
In addition hereto, the legal entities must, as quickly as possible after the entity concerned has become familiar with changes in the company’s real owners, report such changes to the Danish Business Authority’s IT system.
Furthermore, the legal entities must retain this information for five years after the time of the company’s request and attempt to obtain this information.
If the public prosecutor for SØIK (the Danish Public Prosecutor for Special Economic Crimes) requests the disclosure of this information, the legal entity must disclose the information to the public prosecutor. This applies to other public authorities as well, provided however that the authority in question assesses that such disclosure is necessary for the authority to carry out its supervisory and control functions.
Unlike the registration of legal owners, it will always be one or more natural persons that must be registered as real owners. If such natural persons cannot be identified, the management must be registered.
“A real Owner”
The term real owners depends on whether the legal entity is a fund, which by definition is independent, or if it is other legal entities such as companies, businesses etc. where actual ownership can be identified.
Regarding legal entities, which are not funds and where a regular ownership exists, the term real owners means the natural person or persons in the ultimate link of owners who own sufficient shares or voting rights in the legal entity to exercise control hereof or exercise control in any other way of the legal entity.
In relation to the assessment of the control, it is an indication of control if the person in question holds 25% or more of the capital in the company or the voting rights at the general meeting. The assessment is, however, concrete in all cases and the above-mentioned indicator is conveyed from the Act on Measures to Prevent Money Laundering and Financing of Terrorism.
Any person may exercise control even if real ownership does not subsist, provided that the capital or the votes e.g. are pledged or granted to another person by a shareholders’ agreement.
If a person ultimately owns 25% of the capital, but has transferred the votes to another natural or legal person, it is implied that both persons exercise control of the company. The existence of potential voting rights, e.g. by rights of subscription or call options that may currently be dividend or converted, as well as rights to appoint management members must equally be included in the assessment of control.
As regards funds, any real owner will either be a person who has control of the fund, e.g. the board of the fund, or persons receiving funds from the fund, i.e. the special distribution beneficiaries and persons in whose principal interest the fund is founded or operates. It is significant to note that the regulations apply to all funds, i.e. commercial funds and private funds, whether the funds are covered, not covered or exempt from the Act on Commercial Foundations.
All of the legal entities covered by the new regulations must conduct necessary inquiries to identify the real owners. If the real owners of a legal entity cannot be identified, the legal entity must, with the exception of funds, register the daily management as owners instead. The reason why funds are excluded is that funds are already obliged to report on the persons who have control of the company. This will typically be the board of the fund.
The registration of the legal entities must be done as quickly as possible after the legal entity in question becomes aware that the real owner(s) cannot be identified.
In this connection, it is important to note that certain businesses governed by the Act on Certain Commercial Undertakings are exempt from the obligation to register the daily management. The new regulations will, however, impose such obligation if the business in question cannot identify its real owner, irrespective of the general exemption hereof.
Basic Registration in the Central Business Register
Certain commercial businesses, e.g. general partnerships and limited partnership companies, as well as certain funds are not currently registered in the Central Business Register (CVR). If, however, they are subject to the new regulations on reporting of real owners, the Danish Parliament has also decided that such legal entities must be registered in the CVR so as to ensure proper reporting and publication of the information of the real owners.
The information to be reported is, however, limited to the CVR no., business form, date of establishment, date of expiry (if any), name and address.
The amendment introduces numerous requirements on registrations that, especially in companies etc. with complicated ownerships, require a thorough assessment of the information to be reported in the particular case. We recommend that the companies etc. prepare for the new requirements in advance and organize appropriate procedures with the intent to ensure the ability to obtain the necessary information. Likewise, businesses, funds etc. not previously subject to the requirements on reporting regarding ownership must relate to the regulations.
However, it is possible that the conclusion will be that there are no “real owners”, particularly in complex international company structures, and thus, only the Danish management will be registered. This will only to a limited extent be compatible with the purpose of the new regulations.