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16 September 2019

RJ GAITO Transaction and Consulting News

News

Luxembourg introduces a register of ultimate beneficial ownership

Mar 04 2019

On 13 January 2019 – with the 4th 'AML Directive' of May 2015 (the AML Directive), Luxembourg introduced a Register of Beneficial Owner ('RBO') (a.k.a Registre des Bénéficiaires Effectifs).

The law of 13 January, 2019 (the 'Law'), published on 15 January 2019, established the RBO thereby transposing article 30 of the AML Directive.

The law came into force on 1 March, 2019.

The entities that are subject to the law will have six months to comply with the new legislation.

AML practical advice

CONCERNED ENTITIES

All entities that are registered with the Luxembourg Trade and Companies Register (such as the SARL, S.A. and others)1 with an exception for merchants who are physical persons.

Publicly listed entities, whose securities are admitted to a regulated market in Luxembourg, or in a market of an EU Member State, or an EU associated country, will be exempt from registering the 'Beneficial Owner' on the RBO.

In this case, the entity is only required to register the name of the regulated market where the securities are admitted to trading.

The Law refers to the Luxembourg law 12 November 2004 relating to combatting money-laundering and terrorism.

DEFINITION OF BENEFICIAL OWNER

Any person that is in control of a legal entity either directly or indirectly by virtue of a percentage of shareholding or voting rights, qualifies as an effective beneficial owner. 

A holding of 25% is considered to qualify as control.

Any physical person that exercises control in another manner could be considered as exercising control.

PUBLISHED INFORMATION 

  • First and family names;
  • nationality;
  • date and place of birth;
  • place of residence, private and professional addresses;
  • ID numbers; and
  • nature and the size of interest held.

The information is required to be published within one month of the registration-triggering event.

LUXEMBOURG BUSINESS REGISTER ('LBR')

The LBR is responsible for the registration, maintenance and management of the information, as well as making the information available.

Information is only deposited online.  Incomplete information will be systematically refused with a request for regularisation with a request to comply within 15 days.

The LBR is only responsible for information recorded in the register and the LBR may refuse the recording of information.

It should be noted that a refusal to record information requires a reasoned justification, the available recourse rights, the competent tribunal and the schedule to be observed for legal recourse.

ACCESS TO THE REGISTER

  • Unlimited access to the national authorities (e.g. prosecutors, investigatory judges and financial investigation units);
  • Other than national authorities, access will be available, however, with the restrictions on access to the personal address and ID numbers of individuals;
  • Limitation on access can be requested:
    • exceptional circumstances;
    • duly reasoned request ;
    • when the access to information will expose the effective beneficial owner to a disproportionate risk of fraud, kidnapping, extortion, harassment;
    • beneficial owner is a minor, or else incapacitated.

JUDICIAL PROCEDURE 

In the event of a registration refusal, or refusal to grant limited access, judicial recourse is available to all affected parties within a deadline of 15 days of the notification of the decision.

The competent tribunal is the President of the District Court dealing with commercial matter for commercial parties, and the President of the District Court for 'sociétés civiles', non-profits, foundations, agricultural and public establishments; the state and municipalities will be subject to the jurisdiction of the President of the District Court dealing with civil matters;

Both judicial authorities will be handled in the manner as summary and emergency matters are handled.

CRIMINAL SANCTIONS

In case of non-compliance with the law, a fine of €1,250- to €1,250,000.- may be applied.

OUR TAKE

In the era of full disclosure, this may seem a natural progression; however, our first reaction to the law was that these measures affect the Luxembourg 'sociétés anonymes' (S.A.) and the notion of its confidential shareholding for those shareholders holding more than 25%.

It further diminishes Luxembourg law’s principles of a right to privacy and the benefit of professional secrecy.

Investors will need to determine carefully whether any party reaches the threshold of 25%. However, in the absence of that threshold determination, determination of the Beneficial Owner will henceforth become a far more complex matter with far-reaching implications within the context of international deal structuring.

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1. Article 1 para. 2-15 of the 19 December 2002 law relating to the Register of Commerce and Companies.

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