According to the draft Bill’s wording, the UBO-register is intended to:
“To make sufficient, accurate and up-to-date information accessible concerning the ultimate beneficiaries (as defined in Article 4, 27°, a)) of companies established in Belgium; regarding the ultimate beneficiaries (as defined in Article 4, 27°, b)) of trusts; regarding the ultimate beneficiaries (as defined in Article 4, 27°, c)) of foundations and (international) non-profit associations and for the ultimate beneficiaries (as defined in Article 4, 27°, d)) of legal entities that are similar to fiduciary agreements or trusts.”
According to the European Commission, the lack of transparency concerning identifying ultimate beneficiaries and supervising legal entities and legal constructions places these entities in a vulnerable position, as they face the risk of abuse by criminals and terrorists. In addition, the lack of transparency of electronic money transfers facilitates the flow of illicit money and money laundering. To cope with this lack of transparency and information, a very broad definition of “ultimate beneficiary” has been proposed.
For this reason, the Commission has strengthened the requirements regarding transparency and introduced the requirement to hold a ‘Belgian UBO-register’. The requirement to make available reliable information for the ultimate beneficiaries of and the monitoring of companies, trusts and other legal entities and legal constructions has been clarified and reinforced in the Directive.
In addition, the requirements regarding the information on electronic money transfers have been extended to identifying the ultimate beneficiaries of such financial transactions.
The Directive has also clarified the definition of ultimate beneficiaries. When a legal entity does not succeed in identifying the natural persons who are its ultimate shareholders or whom control the legal entity, the Directive has qualified the legal entity’s executives as the ultimate beneficiaries. The Directive has clarified the concept of the ultimate beneficiaries of trusts, foundations and similar legal constructions, by summarising all the types of individual involved in such legal constructions and by defining who falls within the scope of the definition.
The objective is to identify in any event and for each legal entity subject to the law, one or more natural persons as the ultimate beneficiaries in the UBO-register. In the majority of cases, this person will be any direct or indirect shareholder who holds 25% or more of the shares or in the absence thereof, the members of the board or other executives of the company. In any event, it will be appropriate to examine for each entity, be it a company, trust or foundation who must be registered as the ultimate beneficiary.
These requirements will be relatively straightforward for companies established in Belgium – which will be the majority of cases. The requirements for legal entities similar to trusts (Belgian law does not have the concept of trusts) or fiduciary alike agreements will be more complex.
In this light, the Council of Ministers will adopt a Royal Decree to specify which entities will fall within the draft law’s scope. This draft law’s explanatory memorandum has explicitly emphasised that, currently, legal uncertainty exists regarding the practical application in the UBO-register of the registration of trusts, fiduciary agreements and similar legal constructions. In the course of December 2016 the trigger for the registration of trusts, fiduciary agreements and similar legal constructions in any EU Member State also changed from “the element of tax consequences” to a territorial concept, with ‘the place of management’ as the ‘trigger’. As a consequence, it will be impossible to hold information about trusts in the Belgian UBO-register for the simple reason that Belgian trusts do not exist.
The Treasury’s General Administration, noted above, will be in charge of the collection, preservation, management and monitoring of the quality of the information and for making it available. However, the fact that the UBO-register will be monitored by the Federal tax Authorities does not imply that the tax authorities will have unlimited access to this information. The tax authorities will only be authorised to consult the UBO-register within the framework of the law and for reasons concerning the prevention of money laundering and the fight against terrorist financing. The tax authorities will not be allowed to consult the UBO-register in the context of a general tax audit. The same finality regarding access to the information on the UBO-register also applies to all other parties who will be authorised to consult the register. Further details regarding access and the use of the data in the UBO-register have not been determined yet and will be specified in a Royal Decree.
It is not yet clear: who will have access to the data in the register and how the access to the register will be organised, for what purposes access could be requested, and for what purposes the information could be used. The different (legal) sources and comments thereon are divided.
Currently, the draft Bill has been submitted to the Council of State for its advisory opinion. It remains to be seen how the Council of State will judge the outstanding legal questions and issues and how the Council of State will judge the relationship between the UBO-register’s use and privacy regulations, which could conflict with each other.
It is important to keep a ‘close eye’ on this matter and for both legal entities and (potential) ultimate beneficiaries to take the appropriate measures when the law finally enters into force.
Tiberghien Lawyers will be delighted to assist you with these legal requirements.
Gerd D. Goyvaerts - partner Tiberghien (gerdd.goyvaerts@tiberghien.com)
[1] Directive(EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC.