There are important developments in the Netherlands and in Europe regarding the register in which personal details of ultimate beneficial owners ("UBOs") of companies and other entities will be recorded ("UBO register"). This update provides a high-level summary of the major developments.
On 31 January 2018 the Dutch government published a draft decree, designating the categories of natural persons who will be classified as UBOs in any event for the purpose of customer due diligence procedures carried out by banks, insurance companies, lawyers, civil law notaries, tax advisers and other service providers. Although the draft decree does not directly relate to the UBO register, which is yet to be introduced in the Netherlands, we expect that the definition of UBOs for customer due diligence purposes as set out in the draft decree will also be the starting point for the Dutch UBO register. The draft bill for the introduction of the UBO register, which is expected to be submitted to the lower house of the Dutch parliament (Tweede Kamer) during the first half of this year, has not yet been published and hence it is still unclear exactly what the criteria will be for classifying individuals as UBOs for the purposes of the register. Nevertheless, the draft decree gives further insight into the lines along which the Dutch government is likely to proceed.
Definition of UBOs in the Netherlands
The definition of UBOs in the draft decree is based on the definition of "beneficial owner" in the fourth European Anti-Money Laundering Directive ("AMLD4"). The draft decree contains a non-exhaustive list of categories of natural persons who in any event constitute UBOs of companies and other entities. The following categories are particularly noteworthy.
BVs, NVs, private partnerships, limited partnerships, general partnerships, cooperatives and similar entities • The UBOs of a Dutch BV (private limited liability company), NV (public limited liability company) or other similar entity, other than - in brief - a listed company that is subject to sufficient disclosure requirements, are in any event the natural persons who ultimately own or control the entity, (i) through direct or indirect ownership of more than 25% of the shares, voting rights or ownership interest in that entity, or (ii) by other means, such as the right to appoint or dismiss the majority of the members of the entity's administrative, management or supervisory body of the entity. • The criteria for determining the UBOs of a Dutch maatschap (private partnership), CV (limited partnership), VOF (general partnership), coöperatie (cooperative), or a similar organisational form, resemble the criteria for BVs and NVs, tailored to the specific organisational form in question. The threshold of more than 25% is also generally applicable. • If no "real" UBO can be identified on the basis of ownership or control, or if there is any doubt that the person(s) identified are the UBO(s), the natural person(s) who hold the position of senior managing official(s) are deemed to be the UBO(s).
Foundations and Mutual Funds • The UBOs of a Dutch stichting (foundation) are in any event: (i) the incorporator(s), (ii) the board member(s), (iii) if applicable, the beneficiaries or, where the individuals benefiting from the foundation cannot be determined, the class of persons in whose interest the foundation was mainly set up or mainly operates, and (iv) any other natural person exercising ultimate control over the foundation by other means. It is unclear whether all holders of certificaten van aandelen (depositary receipts for shares) issued by a Dutch foundation that is a stichting administratiekantoor ("STAK") are deemed to be beneficiaries - and hence UBOs - of the STAK. If this proves to be the case, this will have a major impact on companies in which, for example, family members and/or managers invest through depositary receipts for shares: a natural person typically qualifies as a UBO of a BV or NV if he/she holds a direct or indirect interest of more than 25%, but for holders of depositary receipts for shares issued by a STAK there might be no minimum threshold when determining the STAK's UBOs. This has major practical implications and is undesirable from a privacy perspective. • In anticipation of the draft bill for the introduction of the UBO register, the Dutch government is currently researching whether or not a Dutch fonds voor gemene rekening (mutual fund) should also be obliged to record information about its UBO(s) in the register.
Developments in Europe
Fifth European anti-money laundering directive In mid-December 2017 political agreement was reached at European level on a proposal to amend AMLD4, the directive that requires member states to establish a UBO register. This proposal is also known as the fifth European anti-money laundering directive ("AMLD5") and entails important changes to AMLD4, including the following: (i) in all member states the public will have access to information in the registers on UBOs of companies and other legal entities, (ii) the UBO registers of all member states will be directly interconnected, and (iii) information on UBOs of trusts and similar legal arrangements will be more widely accessible (parties that can demonstrate a "legitimate interest" will have access, for instance investigative journalists). On 29 January 2018 the members of two committees of the European Parliament (Economic & Monetary Affairs and Civil Liberties, Justice & Home Affairs) supported AMLD5 by a large majority. The next step is approval by the plenary meeting of the European Parliament.
The UBO register in other European countries Our research report dated 31 August 2017 showed that only a few member states met the 26 June 2017 deadline for the implementation of AMLD4. Several countries, such as the Czech Republic, Denmark, France, Germany, Latvia, Slovenia and Sweden, have now established an operational UBO register. In other countries, including Belgium, Croatia and Italy, AMLD4 has been implemented in national law, but secondary legislation containing details on the registration of UBO information has not yet been published. In Belgium, a Royal Decree will be issued after the Commission for the Protection of Privacy register has given its advice regarding the functioning modalities of the UBO register. To date, neither the advice of the Commission, nor the Royal Decree are available and no expected publication date has been publicly announced. On 6 February 2018 the Luxembourg Parliament held a first voting round with respect to the bill implementing some of the provisions of AMLD4, including with regard to the application of "a holistic, risk-based approach" by all professionals who are subject to anti-money laundering rules. This bill does not implement the UBO register in Luxembourg. That will likely occur later this year by means of separate bills. More news on this will follow shortly.
Now that several countries have an operational UBO register, we can unfortunately conclude that the requirements for registering UBOs vary widely between member states. There are important differences when it comes to providing information to UBO registers in different countries and, much to our surprise, the result of identifying UBOs in one country can differ from the result in another country. This is cumbersome for companies with subsidiaries or branches in multiple European countries, and their owners. We will closely monitor the implementation of the UBO register in the Netherlands and the rest of Europe and will keep you informed.