Parliament recently passed a new law on the registration of beneficial owners of Austrian legal entities. After obtaining the necessary approval of the Austrian federal states, the law is expected to be published in the Federal Law Gazette in September 2017 and will enter into force on January 15 2018.

As part of tranposing the Fourth Anti-money Laundering Directive(1) into national law, the law contains:

  • the definition of a 'beneficial owner' for the entire Austrian anti-money laundering regime; and
  • provisions on the establishment and operation of the Beneficial Ownership Register.

In disclosing the relevant information on beneficial owners, the register aims to detect and prevent money laundering, especially with regard to complex corporate structures, holding companies or private foundations and trusts.

Legal entities concerned

Legal entities subject to the law are partnerships (general and limited partnerships), corporations (limited liability companies, stock companies) and other legal entities (associations, private foundations, cooperative societies) with their corporate seat in Austria, as well as trusts and trust-like agreements if they are managed in Austria. The Beneficial Ownership Register will contain approximately 350,000 legal entities.

Definition of 'beneficial owner'

In order to be registered, the respective legal entity must identify its beneficial owners and take reasonable actions to verify their identity. As a rule, all natural persons who own or control a legal entity are considered its beneficial owners and must be registered in the Beneficial Ownership Register. With regard to companies, the law provides for three different approaches:

  • a natural person directly holds more than 25% of the shares in an Austrian company;
  • more than 25% of the shares in an Austrian company are held by another legal entity, which is directly or indirectly controlled by a natural person; control in this respect is indicated by directly or indirectly holding more than 50% of shares; or
  • a natural person directly or indirectly holds more than 25% of the voting rights of the Austrian company.

As these three approaches coexist, the identification of a single beneficial owner according to one of them might not be sufficient. All beneficial owners must be identified, verified and registered in the Beneficial Ownership Register. If a beneficial owner cannot be determined in this way, the natural persons at the top management level are considered as beneficial owners in a subsidiary way.

The law contains clear determinations with respect to private foundations and trusts – as the three approaches are hardly applicable to such entities. For private foundations, these are the beneficiaries, founder, foundation council and other persons controlling the private foundation. For trusts, these are the trustee, settler/trustor, protector, beneficiaries and other persons controlling the trust's assets.

Notification to register

From January 15 2018 legal entities subject to the law must submit a notification on their beneficial owner(s) to the Beneficial Ownership Register by June 1 2018 at the latest. The notification must contain the:

  • full name;
  • date and place of birth;
  • nationality;
  • residence; and
  • nature and extent of the beneficial ownership (eg, beneficial owner as a direct shareholder or beneficial owner as a managing director).

If an identified beneficial owner does not reside in Austria, the notification must also include the beneficial owner's identification number and the type of identification. In addition, a copy of the identification must be submitted electronically.

If the relevant information can be clearly derived from an existing register (eg, the Companies Register, the Register of Associations), this data is adopted and the obligation to submit a notification can be omitted. For example, this is the case when all partners of a partnership or all shareholders of a limited liability company are natural persons.

The information on the beneficial owners is submitted to the Beneficial Ownership Register electronically via the Unternehmensserviceportal. Legal professionals are allowed to submit notifications on behalf of their clients. Any changes to the information already submitted have to be disclosed within four weeks of learning of them at the latest.

Access to register

The information in the register is not publicly available and access is clearly limited. Generally, all legal entities have access only to their own data in the register. Persons obliged to comply with the requirements under the Fourth Anti-money Laundering Directive (eg, credit institutions, real estate and insurance agents) have access to the extent necessary to perform their due diligence obligations. To allow proper consultation of their clients, attorneys, notaries, auditors, tax consultants and accountants may also be granted access to the register. Other persons may be granted access only if a legitimate interest is credibly shown. In addition to these private persons, the register is fully available to tax authorities, financial crime authorities, criminal prosecution authorities and the Federal Financial Court.

Access to the Beneficial Ownership Register will be available as of May 1 2018 via the Unternehmensserviceportal.

Non-compliance

If no adoption from other registers is possible, the legal entity must submit a notification on its beneficial owners by June 1 2018 at the latest. If no information is submitted, the legal entity is automatically put on a dunning list and may be repeatedly fined up to €5,000. If the notification obligation is breached with intent, a fine of up to €200,000 may be imposed. If it is breached with gross negligence, a fine of up to €100,000 may be imposed.

Comment

Although the law becomes effective only on January 15 2018, it is high time for every Austrian company to address it. There are two basic scenarios:

  • The simplification of the automatic adoption of information already existing in other Austrian registers is applicable – in this case, at first glance there is no obligation to submit a notification. However, the respective company is nevertheless responsible for the information being accurate on June 1 2018.
  • The simplification of the automatic adoption is not applicable – this means that the structure is not a simple one and the respective company has to invest time to identify and verify the beneficial owner and submit a notification to the register via the Unternehmensserviceportal. In cases of complex multinational holding structures, these tasks may not be easy.

This article was first published on www.internationallawoffice.com