07.08.2020

#beneficialowner – (No Longer) A New Obligation for a Company

Author: Monika Drabek-Rainka

Practical information – a change of the deadline for reporting to the Central Register of Beneficial Owners.

In recent weeks, the Polish legislator has been taking steps thought to reduce negative effects of the current SARS-CoV-2 pandemic and to ‘make life easier’ for entrepreneurs in particular. In addition to financial assistance, there are also other business amenities, including the extension of various types of deadlines such as those for payments or fulfillment of certain obligations. 

The last group includes an amendment to the Act on Counteracting Money Laundering and Financing of Terrorism (later referred to as the AML Act) introduced as part of one of the ‘Anti-Crisis Shields.’ It changes the final date for noticing the Central Register of Beneficial Owners (Polish abbreviation: CRBR) about beneficial owners of the legal entities recorded in the National Court Register before 13 October 2019. The date was postponed from 13 April to 13 July 2020.

Hence, it is worth taking this extra time to recall the obligation and basic issues related to it, especially considering the potential sanctions related to non-compliance with the statutory deadline (as described below).

Who is a beneficial owner?

The mentioned obligation has an essential element that causes difficulties in terms of practical implementation, namely the identification of beneficial owners in question.

According to the article 2(2)(1) of the AML Act, a beneficial owner (parallel to English ultimate beneficiary owner, UBO) is understood as a natural person or natural persons who exercise, directly or indirectly, control over a customer [i.e., a company] through the powers held, which result from legal or actual circumstances, enabling exerting a critical impact on activities or actions undertaken by a customer or a natural person or natural persons, on whose behalf a business relationship is established, or an occasional transaction is conducted, including:

a) in the case of a customer being a legal person other than a company whose securities are admitted to trading on a regulated market and are subject to information disclosure requirements arising from the European Union law or corresponding regulations of a third country: – a natural person being the customer’s stakeholder or shareholder holding the ownership title of more than 25% of the total number of stocks or shares of such a legal person, – a natural person holding more than 25% of the total number of votes in the customer’s governing body, also as a pledgee or a user, or under agreements with other persons authorized to vote, – a natural person exercising control over a legal person or legal persons holding the ownership title of more than 25% of the total number of stocks or shares of the customer or jointly holding more than 25% of the total number of votes in the customer’s governing body, also as a pledgee or a user, or under agreements with other persons authorized to vote, – a natural person exercising control over customer, through holding, in relation to such legal person, powers referred to in Article 3(1)(37) of the Accounting Act of 29 September 1994 (Journal of Laws of 2019 item 351) [parent company], or – a natural person holding a senior management position, in the case of documented lack of possibility to determine the identity, or doubts regarding the identity of natural persons defined in the first, second, third and fourth indent, and in the case of failure to confirm the suspicion of money laundering or financing of terrorism,

b) in the case of a trustee: –the founder, –the trustee, –the supervisor, if any, –the beneficiary, –another person exercising control over the trust;

c) in the case of a client who is a natural person engaged in business activities and in respect of whom no indication or circumstances have been found, which might indicate that another natural person or persons exercise control over him or her, that client shall be deemed to be the beneficial owner.’

While the definition seems to be detailed, reality and practice prove that it can inspire numerous questions.

Above all, however, it should be emphasized that it is always the responsibility of the obliged company to assess the actual state and legal position based on which it later determines and identifies the person or persons who exercise control over it directly or indirectly.

There is also an issue that appears to be extremely important and raises doubts of a practical nature. Namely, the definition of the beneficial owner referred to in Article 2(2)(1) of the AML Act is an open catalog of options (!), which is a consequence of the legislator’s use of the clarifying preposition ‘including’ (stressed in the excerpt from the Article 2 above, introducing point a).

This enumeration is, therefore, only an indication of potential beneficial owners. As a result, the company is required to analyze the premises described in the descriptive introduction to the definition of a beneficial owner and then to treat the listed cases only as subsidiary examples. It may also be noted that in the quoted excerpt, the percentage share in the share capital or votes within the governing body of a legal entity is set at the level of ‘more than 25%.’ Of course, this means that holding, e.g. 25% of shares in a given company, is not yet synonymous with enjoying the status of a beneficial owner. Moreover, regarding non-stock corporations, there is an intriguing and explicitly indicated category of beneficial owners. In certain clearly stated cases, these are natural persons holding senior management positions in a company (an often ignored instance). Hence, it is clear that both the quantitative and legal analysis that precedes the determination of beneficial owners should be carried out in a reliable and detailed manner far different from routine automatic testing.

In conclusion, each above-described entity has at least one beneficial owner. To identify them, it is necessary to identify also every natural person who directly or indirectly exercised control over the company by virtue of powers that are derived from legal or actual circumstances that, in turn, enable wielding decisive influence over the actions or activities performed by the company.

What is the Central Register of Beneficial Owners?

The Central Register of Beneficial Owners is a system which collects and processes information on beneficial owners of specific entities.

CRBR jest rejestrem jawnym, udostępnionym nieodpłatnie, a podstawą prawną jego utworzenia stanowi art. 194 ustawy AML (implementującej

The Register is public and available free of charge. The legal background for its establishment is expressed in Article 194 of the AML Act (which implements the Directive 2015/849, the so-called EU 4thAML Directive). According to the Polish Ministry of Finance website, ‘one of the Register’s main tasks is to prevent money laundering and terrorist financing (…). Public nature of the Register (…) contributes to increasing confidence in the financial market and business trading participants.’

In order to facilitate the use of the Register, the Ministry of Finance has offered a search engineof registry entries. Interesting information which is stored there can be assessed after submitting an electronic application. Under the relevant regulation, the data is updated and provided at the latest on the next working day after submission of an application, yet in reality, the system generates information (visible on the website, but also downloadable in PDF or XML formats) almost immediately.

How, where and when – details of reporting to the Register

Beneficial owners should be reported electronically via the suggested platformand using a qualified electronic signature or an ePUAP trusted profile. Persons authorized to represent the company act on behalf of the obliged company following the rules of representation described in the National Court Register (including, e.g. proxies or persons governing bodies of companies). It is, therefore, not possible to report beneficial owners by a regular representative.

It is crucial to remember the deadline for notifications about beneficial owners. The allowed time for newly established entities is seven days from the date of the company’s registration in the National Court Register.

It is also worth considering that the report and data processing within the framework of the above-mentioned report does not require any consent or even knowledge of the individuals concerned.

Who is responsible for reporting, and what are the sanctions?

The obligation to report beneficial owners concerns the following types of companies: general partnerships, limited partnerships, limited joint-stock partnerships, limited liability companies, joint-stock companies (except for public companies), and – since 1 March 2021 – simplified joint-stock companies (SAS).

The AML Act describes two types of sanctions for non-compliance with its provisions, namely administrative and criminal sanctions. According to Article 153(1) of the AML Act, a company which fails to comply with its obligation on time is subject to an administrative penalty of up to PLN 1 million. Moreover, an announcement(only in Polish) from the Ministry of Finance emphasizes that the AML Act does not allow ‘active repentance’ (allowed under Article 16 of the Polish Penal Fiscal Code). Hence, compliance with statutory deadlines is essential for the company’s financial responsibility.

The second type of sanctions relating to breaches of obligations and the reporting procedure is criminal liability for making false statements. A statement of awareness of criminal liability in this respect is attached by persons representing the company for the report.

A couple of words to sum up the considerations

To sum up, each company (excluding public companies) has to be represented by persons authorized to represent according to the National Court Register and has to report electronically to the Central Register of Beneficial Owners. The report must cover all natural persons having direct or indirect control over the company or all the natural persons on behalf of whom the company’s business relations are established, or an occasional transaction is carried out. This report must be conducted thoroughly, with the company beingmindful ofan administrative penalty amounting to PLN 1 million.

The deadline for reporting is:

13 July 2020 –for companies recorded in the National Court Register before 13 October 2019 and;

7 days from the entry in the National Court Register –for other companies.