France’s transposition of European Directive 2015/849 dated 20 May 2015 on money laundering is now in effect, with a compliance deadline of 1 April 2018. The provisions of Ordinance no. 2016-1635 of 1 December 2016 reinforcing the French mechanism against money laundering and the financing of terrorism and of Decree no. 2017-1094 of 12 June 2017 (hereinafter, the “Decree”) have now been incorporated in the French Code monétaire et financier (Monetary and Financial Code).
These provisions compel most companies operating in France to register their beneficial owners with the Registry of Commerce and Companies of the competent Commercial Court. Similar rules apply throughout the European Union.
Beneficial Ownership and Filing with the Registry
The notion of beneficial ownership is not defined by the Decree, although it is defined in the Directive as including each natural person who either ultimately owns, directly or indirectly, more than 25% of the share capital or voting rights of the company, or exercises, by any other means, a supervisory power on the managing, administrative or executive bodies of the company or on the shareholders general assembly.
The information that must be filed is essentially identical to that required by financial institutions and other entities such as law firms in order for them to carry out their mandatory Know-Your-Client (KYC) procedures.
The Initial Filings
The declaration of beneficial ownership must be filed at the Registry of the Commerce and Companies when a company is first registered with the Registry of Commerce and Companies or, at the latest, within 15 days as of the date of issuance of the receipt of registration (Art. R 561-55 of the Code monétaire et financier) i.e., when it is created or opens a branch in France.
For companies already registered, the deadline for the declaration is 1 April 2018. If subsequent updates are required new filing must be made within 30 days as of the fact or the act giving rise to a required update (Art. R. 561-55 of the Code monétaire et financier).
On the Beneficial Owner
The declaration must set forth the owner’s name and particulars, as well as the means of control exercised by the beneficial owner and the date on which s/he became a beneficial owner (Art. R. 561-56, 2° of the Code monétaire et financier).
Persons Having Access to the Register of Beneficial Owner
Access to the Register of Beneficial Owner is limited to magistrates of the civil courts and the Ministry of Justice; investigators working for the Autorité des marchés financiers (French Financial markets Regulator); agents of the Direction générale des finances publiques (Directorate-General for Public Finances); qualifying credit institutions, insurance and mutual insurance companies and investment services providers; and any person authorized by a court decision to this effect.
Penalties for Non-Compliance
The new provisions of the Monetary and Financial Code provide remedial penalties with the possibility for any person having a legitimate interest to bring an action in order to force the defaulting company to fulfil its obligation to declare its beneficial owners (Art. R. 561-48 of the Code monétaire et financier).
Punitive provisions have also been introduced: failure to declare the beneficial owners to the Registry of Commerce and Companies or filing a declaration involving incomplete or inaccurate information is punishable by 6 months of imprisonment and a fine of €7,500 (Art. 561-49 of the Code monétaire et financier).