French Circular No. 2016-1635 dated 1 December 2016, implementing the 4th EU Directive 2015/849 of 20 May, 2015 on “the prevention of the use of the financial system for the purposes of money laundering or terrorist financing”, imposes an obligation upon companies which are not listed on a stock market to disclose and to keep accurate and up-to-date information on their beneficial ownership.
As a reminder, article L. 561-2-2 of French Financial and Monetary Code (“CMF”) provides that the beneficial owner is “the natural person who directly or indirectly controls the client or the natural person on whose behalf a transaction or activity is being conducted”.
The concept of control is defined, for each type of legal forms involved, by articles R. 561-1 to R. 561-3 of French Financial and Monetary Code. Thus, for instance, the beneficial owner of a company is the natural person who directly or indirectly holds more than 25% of its voting rights or controls such company through its administrative, management or governance bodies or the General Meeting of its shareholders.
The obligation to disclose information covers:
- companies and economic interest groupings (groupement d’intérêts économique) that are based in a French district (département) and have a legal personality;
- commercial companies whose registered office are not located in a French département but that have an establishment in one of these départements; and
- other legal persons that must register in France under the applicable statutory or regulatory provisions.
Any infringement is punishable by a penalty of a six months imprisonment and a fine of €7,500 (art. L. 561-49 CMF). Moreover, an injunction process enables the courts, either spontaneously or at the bidding of the State Prosecutor or of any person who can evidence a legitimate interest, to order any eligible company to file or to commission the filing of information concerning its beneficial owners, under penalty for non-compliance (art. L. 561-49 CMF).
The circular, which led to the filing of a bill of law ratifying the new provisions on 27 March 2017, will come into force on 1 August 2017 (even if it has not yet been ratified). However, companies registered before 1 August 2017 shall have until 1 April 2018 to comply with this new obligation of information.
The circular states that a future decree will lay down certain terms linked to the implementation of this information obligation. This decree establishing new articles R. 561-55 to R. 561-63 of French Financial and Monetary Code, has just been published in the “Official Journal” (French decree No. 2017-1094 of 12 June 2017). It specifies the (1) information submission procedure, (2) persons who can access such beneficial ownership information, and (3) process of securing an injunction to order a company to file such information.
However, it should be noticed that, as an aside to the publication of this decree, it is unclear whether article 139 of French “Loi Sapin II” law No 2016-1691 of 9 December 2016, which incorporates provisions concerning the beneficial ownership register that are slightly different from those arising from the circular, still applies.
Information submission procedure
The information obligation imposed upon the companies covered by the circular requires them to file a beneficial ownership document within the clerk of the commercial court, containing the following information (art. R. 561-56 CMF):
- Regarding the company: the name or company name, form of incorporation, address of the registered office, and where applicable, registration number in the trade and company registry (“RCS”) ;
- Regarding each beneficial owner: the family name, given name, pseudonym, first names, date and place of birth, nationality, personal address, the ways in which that person controls the company or the legal entity (determined in accordance with art. R. 561-1 to R. 561-3 CMF) and the date on which the natural person(s) became beneficial owner of the company.
This document must be signed and dated by the legal representative of the company.
This obligation must be performed as part of a company’s application for registration or within fifteen days following the delivery of the receipt issued upon filing the application for the formation of a company at the latest (art. R. 561-56 CMF).
The need to maintain an updated register of beneficial owners also imposes an obligation upon each company involved to file a new document within thirty days following any circumstance or event that makes it necessary to rectify or complement the information mentioned in the register (art. R. 561-55 CMF).
Persons who can access to beneficial ownership information
The decree exhaustively lists the categories of persons who are authorised to access to the beneficial ownership document (arts. R. 561-57 and R. 561-58 CMF).
This list includes judges and magistrates, customs officials, the investigators and inspectors or the Autorité des Marchés Financiers (i.e., French financial market authority), the operatives of French Treasury, or, under certain conditions, persons subject to measures designed to combat moneylaundering and financing of terrorism.
Moreover, the decree lays down the terms under which any person who can evidence a legitimate interest may request disclosure of a company’s register of beneficial owners, if need be by filing a petition before the commercial court (art. R. 561-59 CMF).
Injunction procedure forcing a company to file the information
Finally, the decree lays down a procedure for ordering a company to file information about its beneficial owners, namely:
- the procedure for petitioning the courts for an injunction (art. R. 561-60 CMF);
- the conditions under which the petitioner may appeal if the petition is rejected (art. R. 561-61 CMF);
- the ambit and terms of the injunction issued by the court (art. R. 561-62 CMF); and
- the consequences in case of non-compliance with the injunction (art. R. 561-63 CMF).