Extension of UBO Register Submission. A simple Guide to Compliance and transparency.

In a sequence of official notifications, the Department of the Registrar of Companies and Intellectual Property (TEEDI) has been diligently updating the public and pertinent entities on crucial developments related to the establishment of the Register of Beneficial Beneficiaries. This journey began with the enactment of Law 188(I)/2007 on the Prevention and Combating of Money Laundering from Illegal Activities, which officially took effect on February 23, 2021.

This article exclusively focuses on the latest notification. On January 17, 2024, the Department of the Registrar of Companies and Intellectual Property issued a significant update regarding the extension of the deadline for submitting details of Beneficial Beneficiaries in the revamped Register. This adjustment is geared towards enhancing the efficiency of the register through a new digital platform.

New submission deadline

All companies and legal entities are urged to submit Beneficial Beneficiary details by March 31, 2024. This additional time is provided to facilitate a smooth transition for everyone to the upgraded digital platform. It also presents an opportunity for entities to review and update their beneficiary information, ensuring it aligns with the most current regulatory standards.

Implications of non-compliance

After the specified deadline, companies and legal entities that haven’t followed the submission requirements will face financial consequences. Law 188(I)/2007 grants the government the authority to impose penalties, emphasizing a strict approach to preserving the financial system’s integrity and preventing illicit activities. An individual who declines, falls short, or overlooks the responsibilities associated with submitting information about the beneficial owners of companies and other legal entities, may face a penalty of two hundred euros (€200). Additionally, a supplementary fine of one hundred euros (€100) per day will be imposed for each ongoing violation, with a cumulative maximum fine capped at twenty thousand euros (€20,000).

Submission obligations

The Registrar of Companies, through Directive KDP 112/2021, mandates that every legal entity, such as a company or cooperative, along with its officials (e.g., directors, managing directors, and secretaries), must submit the details of its beneficial owners to the register.

  • Who should submit: It’s crucial to note that the obligation falls on the official or partner of the entity, not a representative acting on its behalf, unless that representative is also an official or partner in the same entity.
  • Liquidation scenario: In instances where a liquidator is appointed to a company after March 12, 2021, the responsibility to submit beneficial owner data remains with the company and its officials. Even if the liquidator terminates the powers of the officers, their obligations persist, as their appointment continues. The liquidator, however, bears no responsibility or authority towards the register of beneficial owners.
  • Receiver/Administrator appointment: Similarly, if a receiver/administrator is appointed to a company after March 12, 2021, the officials of the company must submit details to the register, following the relevant consent or information provided by the receiver manager.

Entities required to submit

Entities required to submit beneficial owner information include domestic companies, European companies, and cooperatives.

  •  Exempt from this obligation are foreign companies, trade names, and entities subject to specific criteria, such as those listed on regulated markets, adhering to EU disclosure requirements, or applying for deletion or undergoing liquidation before March 12, 2021. Other factors to consider pertinent to exemptions:
  1.  In the case of deletion, the date of notification to the Department is crucial.
  2.  In voluntary liquidation, the date of approval of the resolution for liquidation is considered.
  3.  In court-ordered liquidation, the date of the application for liquidation submission to the court is taken into account.

Defining the Beneficial Owner

It is imperative to know who the “beneficial owner” is as the information to be submitted must be real, accurate and updated. Identifying the Ultimate Beneficial Owner (UBO) within a complex business structure is a critical process, essential for compliance with international regulations and ensuring transparency in financial dealings.

In accordance with current law, the UBO is a natural individual with the ultimate ownership status or final control of a legal entity. This control can be direct or indirect, as follows:

  1. Holding a sufficient percentage of shares.
  2. Exercising voting rights.
  3. Having significant influence or control through other means.

In cases where no individual is clearly identified based on ownership rights, or there’s doubt about the identified person, the senior manager should be declared. Make sure you have conducted thorough due diligence.

Different forms of ownership

Various forms of ownership exist, as follows:

  • Direct Ownership: This occurs when a person holds at least a 25% stake and a share or ownership right of over 25% in a company’s issued capital.
  • Indirect Ownership: This happens when a person holds a 25% stake and a share or ownership right of over 25% through a legal entity.
  • Combination of Direct and Indirect Ownership: When a person has both direct ownership (in their name) and indirect ownership (on behalf of a legal entity), they hold a participation of at least more than 25% of the ownership right.

In the case that a Cypriot entity’s ownership in the Republic leads to a trust, foundation, or a similar legal arrangement, caution must be exercised as the information to be submitted in the UBO register will include details about the natural persons along with the names of the mentioned entities.

Further vigilance is required when the beneficial owner is a trust:

If the UBO is a Trust registered in Cyprus , details should be included for about at least 3 or more Natural Persons, specifying the following roles for each:

  1. Settlor.
  2. Trustee.
  3. Beneficiary.
  4. Protector.
  5. Any other natural person exercising ultimate control.

If the trusts’ country of jurisdiction is outside Cyprus, completing at least one category from above is mandatory.

Practical approaches to navigating corporate ownership

Understand the Corporate Structure

In addition to delineating the UBO and the submission process, it is crucial to undertake due diligence. Many businesses operate through subsidiaries, affiliates, and holding companies. Understand the ownership structure by recognizing each company’s role and how they relate to one another.

Examine Public Records

Publicly available records, such as corporate registries, can be a valuable starting point. In Cyprus, the Department of Registrar of Companies and Official Receiver maintains these records. These documents provide insights into the ownership and management of companies, aiding in the identification of shareholders and directors. Top of Form

Review Shareholder Registers

Companies are required to maintain up-to-date shareholder registers. By examining these registers, one can trace the ownership structure and identify individuals with significant shareholdings. In Cyprus, companies must keep an accurate record of their shareholders, including details about their ownership stakes.

Analyze Corporate Governance Documents

Corporate governance documents, such as articles of association and board resolutions, offer insights into decision-making processes and ownership dynamics. Understanding the distribution of voting rights and decision-making authority can help pinpoint the UBO within the structure.

Conduct Due Diligence

Due diligence is an indispensable part of the UBO identification process. Comprehensive background checks, verification of provided information, and risk assessments ensure a thorough and accurate understanding of the ownership structure.

In conclusion, it is evident that this task demands our continuous attention; while representing a great stride towards increased transparency.