Frequently asked questions about the UBO register
Date: Sept. 24, 2020
Modified November 14, 2023
Written by: Emile Sahhar
Reading time: +/- 2 minutes
Date: Sept. 24, 2020
Modified November 14, 2023
Written by: Emile Sahhar
Reading time: +/- 2 minutes
Earlier we wrote about the advent of the UBO register. Meanwhile, more and more is becoming clear about the impact of the UBO register on practice. And it is about time, because this weekend, September 27, 2020 to be exact, the UBO-register goes live. In the run-up to this, we receive questions about the UBO Register from many clients. In this blog, we have compiled answers to these questions
As of September 27, 2020, Dutch legal entities - barring exceptions (see the article by Emile Sahhar) - are required to report their ultimate beneficial owners (UBOs) to the UBO register. The idea behind this is to clarify who is 'pulling the strings' within companies in order to prevent money laundering and terrorist financing. Especially for advisors, who have to report unusual transactions.
UBO is an abbreviation that stands for ultimate beneficial owner, or beneficial owner. They are the individuals who ultimately own or control an entity. A UBO is always a natural person. Who should be designated as UBO of an entity depends on its legal form. Section 3 of the Wwft 2018 Implementation Decree sets out for each legal form who qualifies as a UBO in each case. UBOs must be registered in the UBO register of the Chamber of Commerce (hereinafter "KVK") as of September 27, 2020.
For example, for the limited liability company or public limited company, the UBO is the natural person who (in)directly owns or controls the following companies and other legal entity. This is determined according to the following requirements:
Slightly different requirements apply to the foundation, association, cooperative and mutual society:
The partnership (partnership, limited partnership, general partnership) is subject to almost the same requirements as above namely:
Dividends are paid on cumulative preferred shares on a priority basis. Distribution of profits (dividends), reserves and liquidation surpluses fall under the "concept of distribution" and thus under the concept of "ownership interest" (first requirement), according to the Minister. In the case of cumulative preferred shares, the right to profit distribution in a financial year must be compared with the total assets (profit/reserves/surplus) of the legal entity. As a result, UBO qualification may depend on annual distributions each year. As a result, UBO qualification needs to be evaluated annually.This makes UBO qualification a recalcitrant issue in specific cases.
As UBO of a foundation (a STAK is always a foundation) qualifies in the first instance the natural person who (in)directly holds more than 25% of the ownership interest in the legal entity. By 'ownership interest' is meant, among other things; right to distribution from the assets, such as profits, reserves or a liquidation surplus, for example by means of certificates (also called distribution criterion).
Whether depositary receipt holders qualify as UBO of a STAK also depends on the aforementioned distribution criterion, namely whether the distributions made to the depositary receipt holders come from the assets of the foundation. It is important to determine whether the STAK itself has the discretion to dispose of the distributions. The moment the terms of administration state that the STAK is obliged to pass on any distribution on depositary receipts to the depositary receipt holders, then there is no freedom of choice for the STAK to dispose of the assets and therefore no distribution from the assets of the STAK takes place. In that case, the certificate holders most likely do not qualify as UBO of the STAK.
The basic principle is that a natural person should always be registered as UBO. If, based on the aforementioned requirements (ownership interest/control), no "true'' UBO can be ascertained or if there are doubts whether the person is actually UBO, then the legal entity should register its statutory directors as UBOs.
Partnerships such as partnerships, limited partnerships and general partnerships must register their partners and associates (except limited partners) as UBOs. In fact, they then qualify as Pseudo-UBO.
A Pseudo-UBO, like a UBO, must be a natural person. If a legal entity is the director, partner or associate, then any natural person who is a director thereof is registered as a Pseudo-UBO.
The following entities incorporated in the Netherlands are required to register UBO information:
The following legal entities are exempt from registration:
The responsibility for registering UBOs lies with the entity. Thus, in the case of legal entities, this obligation lies with the directors. In the case of partnerships, it lies with the person to whom the company belongs. UBOs must cooperate with the registration; they have a so-called cooperation obligation.
In addition to the obligation of entities and (Pseudo) UBOs to keep the data up to date, Wwft institutions are also involved in the registration obligation. Wwft institutions such as banks, attorneys and notaries are obliged to report to the Trade Register when the information from the UBO register does not match the information available to the Wwft institution.
Incidentally, the feedback requirement applies to existing entities only after an initial registration has taken place.
True, but the duty of confidentiality has been specifically declared inapplicable to the duty to report back. This means that failure to comply with this duty by a lawyer, for example, is an economic crime and is punishable by law.
It depends on when the entity was established. New entities, i.e. entities established on Sept. 27, 2020 or later, must register UBOs when first entered into the commercial register (this obligation applies from Sept. 27, 2020 and can be done from 8 a.m.). Existing entities, that is, entities established before Sept. 27, 2020, must register UBOs 18 months after entry into force. The deadline is from September 27, 2020 to March 27, 2022. Registration can be done at www.kvk.nl/ubo.
Non-compliance with obligations (i.e., the cooperation obligation of a UBO and the registration obligation of the entity's representative) can lead to administrative fines of up to €21,750, the imposition of an order under penalty and, in some cases, even criminal enforcement (think imprisonment, community service or a fine). The legislature has opted for a dual penalty system. Minor violations will be dealt with under administrative law. Examples include failure to provide UBO information on time. Criminal penalties may be imposed if serious circumstances arise. Examples of such circumstances include the deliberate disclosure of incorrect UBO information and a possible combination with other (fraud) offenses.
The following data of the UBO should be provided to the UBO Registry by the representative of the entity. The accuracy of the data is verified by filing documents showing relevant data.
Some of the information is publicly accessible through the Chamber of Commerce. More specific data is only accessible to competent authorities and the Financial Intelligence Unit (hereinafter "FIU").
Publicly available information from the UBO:
As briefly explained above, some UBO data are only viewable and accessible by competent authorities and the FUI. This concerns the following data:
There has been much criticism of the level of UBO privacy protection. Especially in light of the General Data Protection Regulation (AVG), this can be questioned. However, the legislature has not deemed it necessary to amend the law to this extent. However, several safeguards have been built in. For example, not all data are publicly viewable and in some cases a request can be made to have data blocked. In addition, those consulting the UBO register must register and identify themselves before they can view the UBO register. This is then recorded by the Chamber of Commerce so that the UBO can see who has viewed his data. Finally, it is not possible to search by person, only by the name of the entity.
The law provides an option to restrict access to UBO information. However, this is only applicable if the UBO is exposed to a disproportionate risk. These include a risk of fraud, kidnapping, blackmail, extortion, violence or intimidation or if the UBO is a minor or incapacitated. In such cases, the UBO must apply to the Chamber of Commerce for his data to be blocked. If a UBO of an existing entity wishes his data not to be listed in the Trade Register for the time being, he may possibly request the entity to postpone the declaration until just before the time when registration is mandatory (i.e., March 27, 2022).
In addition, an analysis of the legal structure of an entity may give reason to designate someone else as UBO. If for some reason it is objectionable to register UBOs, such an analysis of the structure combined with a possible restructuring may possibly shed a different light on the matter.
As attorneys for business owners , we understand the importance of staying ahead. Together with us, you will have all the opportunities and risks in sight. Feel free to contact us and get personalized information about our services.