Implementation of the Register of Beneficial Owners
As a result of the enactment of the amendment Law 13(I)/2021 which introduces changes to the Prevention and Suppression of Money Laundering and Terrorist Financing Law of 2007 (the Law) in order to be harmonized with the 5th European Directive (EU 2018/843) (the Directive), the Department of the Registrar of Companies announced the implementation of the interim system solution for the Beneficial Owner (BO) Register for companies and other legal entities on 16 March 2021.
A twelve-month period has been given to all entities to facilitate the collection of the BO data required in the interim system during which, access to the BO information will be granted ONLY to Competent Supervisory Authorities, the Financial Intelligence Units, the Customs Department, the Tax Department and the Police, without any restriction and upon submitting a written request to the Registrar of Companies.
After the twelve-month period, the BO register will become publicly available following payment of three euros and fifty cents (€3,50) fee, per entity.
Definition of Beneficial Owner:
According to the Law, Beneficial Owner (BO) means the natural person(s) who ultimately own(s) or control(s) a legal entity, other than a company listed on a regulated market that is subject to disclosure requirements consistent with Union law or subject to equivalent international standards which ensure adequate transparency of ownership information, through direct or indirect ownership of a sufficient percentage of shares or voting rights or ownership interest in that entity, including through bearer shareholdings, or through control via other means.
It is noted that an indication of ownership which evidences control constitutes a twenty-five percent (25%) plus one (1) share, or ownership right above twenty-five percent (25%) to the customer whether owned by a natural person directly or held by a legal entity which is itself under the ultimate control of the same natural person(s).
The information to be filed in the BO register for each natural person beneficial owner is the following:
- Name, surname, date of birth, nationality and residential address
- Nature and extent of the beneficial interest held directly or indirectly by each beneficial owner, including through percentage of shares, voting rights, or the nature and extent of the significant influence or control with other means exercised by each controlling person
- Identification document number indicating the type of document and the country of document issuance (identity card or passport)
- Date on which the natural person was entered in the register as beneficial owner
- Date on which changes in the particulars of the natural person or the date on which the natural person ceased to be a beneficial owner.
In cases where the shareholding structure of a Cyprus entity registered in the Republic, leads to Trust/s, Foundation/s, other similar legal arrangements or listed companies as beneficial owner(s), the information to be submitted in the BO register is the following:
- Registration number (if any)
- Country of Jurisdiction
- Business address (not applicable to trust)
- Nature and extent of the beneficial interest held directly or indirectly by each beneficial owner, including through percentage of shares, voting rights or the nature and extent of the significant influence or control with other means exercised by each controlling person,
- Date on which the Trust, Foundation, other similar legal arrangement and listed company was entered in the register as beneficial owner and
- Date on which there were changes in the particulars of a Trust, Foundation, other similar legal arrangements and listed company or the date on which it ceased to be a beneficial owner for BO register purposes.
In case where no natural person is identified as the beneficial owner based on the ownership rights or when there is doubt that the person identified is the beneficial owner, the details of the senior management official must be submitted in the BO registry, indicating whether the person is a director in the company or whether it holds another position, by declaring that position. In this case, the nature and extent of the beneficial interest is not submitted on the system.
The responsibility for the submission of information lies with the entity and its officers.
Procedure to implement the registration in the BO register:
Step 1: Registration in Ariadni (the Government gateway portal)
Each company has to create a corporate profile in Ariadni. This can only be done by an officer of the company (director/secretary). In order to register in Ariadni, a company must set up a unique email address (separate from the email address of its officers or representatives), and a unique Ariadni username and passcode.
Step 2: Activation of Ariadni profile.
An officer or legal representative of the company must make an appointment with the relevant authorities (Registrar’s office, Post office, Citizens Service Centers and other offices to be announced shortly), and submit the following documents:
- Copy of certificate of incorporation of the company;
- Authorization from the company to the bearer to submit the documents on behalf of the company. The authorization must be original, signed by at least one of the directors of the company and bear the seal of the company. The name of this person and his/her identity must be explicitly stated in the authorization. Where the procedure is carried out by a director or the secretary of the company, no authorization is required.
- Copy of his/her ID;
- Copy of the email confirming the profile registration (16-digit code).
Step 3: Filing of BO(s) details in the online portal of the Registrar of Companies
The BO details of each company must be filled in the BO register by entering the required information for each beneficial owner through the online portal of the Registrar of Companies.
Nobel Trust will arrange for the creation of the corporate profile of all Cyprus companies under its administration and shall undertake the aforementioned procedure on their behalf. Where necessary we shall be contacting you to collect and/or verify any information needed in order to comply with this obligation within the specified timeframe.
Additional information on BO Registry:
After the initial twelve-month period, members of the public will have access to the BO Registry but ONLY to the following information:
- Name of the beneficiary
- Month and year of birth
- Country of residence and nationality of the beneficiary
- Type and extend of his/her rights in the legal entity.
Newly established entities will be required to submit electronically with the Registrar of Companies relevant information on BO(s) within thirty (30) days from their date of incorporation or registration the latest.
In the event that a change is made in relation to the BO(s) information already filed, the new information must be submitted within at least fourteen (14) days from the date that the entity received notice of such change.
Each December, i.e., 1st of December until 31st of December of each calendar year, all entities must confirm electronically to the Registrar that theirs BO(s) and relevant information remain the same.
In exceptional circumstances, it is possible to provide for exemptions to the access to information in relation to the BO(s), in part or in whole, where that information would expose the BO(s) to a disproportionate risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation or where the BO(s) is a minor or is legally incompetent. This exception does not apply in the case that application for access is made by obliged entities that are credit and financial institutions or by the responsible Supervisory Authority, Financial Intelligence Unit, Customs and Excise Department, Tax Department and the Police.
The information on the BO(s) shall be available through the BO Register for ten (10) years after a legal entity has been struck off from the Register. However, five (5) years after the date of strike off of a legal entity from the Register, access to such information will be permitted only in the course of administrative or criminal enquiry conducted by the Supervisory Authority, Unit, Customs Department, Tax Department and the Police.
A separate registry for BO(s) of trusts (Trusts’ Registry) will be created which will be maintained by the Cyprus Securities and Exchange Commission (CySec). The trustees of express trusts administered in Cyprus are obliged to disclose the BO(s) in the Trusts’ Registry to be created. Express trusts are those created by the express clear intention of the settlor, or the express and clear declaration of the person to whom the property is vested, the trustee, to the benefit of a particular beneficiary or for a purpose.
The timeframe relevant to the application for the registration of an express trust and the information to be included therein as well as the procedure of registration will be determined by CySec with a relevant circular.
In accordance with the Law, the following are considered to be BO(s) of trusts:
- the settlor;
- the trustee(s);
- the protector, if any;
- the beneficiaries, or where the individuals benefiting from the legal arrangement or entity have yet to be determined, the class of persons in whose main interest the legal arrangement or entity is set up or operates;
- any other natural person exercising ultimate control over the trust by means of direct or indirect ownership or by other means.
The difference with the Companies’ BO Registry, is that the Trusts’ Registry, will not be open to the public.
Conditions for having access to the Trusts’ Registry:
In accordance with the Law, access to the Trusts’ Registry will be granted only to:
- Competent Supervisory Authorities, the Financial Intelligence Units, the Customs Department, the Tax Department and the Police
- Obliged entities for due diligence purposes
- Any member of the public in relation to a trust which holds or owns a controlling interest in a company that is not incorporated in the EU (and is therefore not included in any member state’s register of Companies’ Registry).
- Persons that can demonstrate a legitimate interestand proving same through relevant procedure to be implemented. Legitimate interest is established if the applicant shows that his interest relates exclusively and contributes to the prevention of legalization of income from illegal activities and terrorist financing.
The information accessible to categories b and d above will only include:
- Name of the beneficiary
- Month and year of birth
- Country of residence and nationality of the beneficiary
- Type and extend of his/her rights in the express trust.
Following an application for access to the Trusts’ Registry, CySec may approve the application for disclosure or reject it and specify the procedures for applying, approving or rejecting the applications, for accessing the Trusts’ Registry and procedures as to the type of information for which access will be granted.
Additional information on the Trusts’ Registry:
The registration of express trusts in the Trusts’ Registry is obligatory and applies to express trusts of which the trustee is placed or resides in Cyprus or the trustee is placed or resides outside the EU but concludes a business relationship or acquires immovable property on behalf of the express trust.
The registration requirement does not apply to express trusts that have been registered in the register of another member state and the trustee is placed or resides in another member state other than Cyprus or in the case there are more than one trustees and the one is placed or resides in Cyprus or the trustee concludes various business relationships on behalf of the trust in various member states including Cyprus.
In exceptional circumstances, Cysec may provide for exemptions to the access to information in relation to the BO(s) of express trusts, in part or in whole, where that information would expose the BO(s) to a disproportionate risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation or where the BO(s) is a minor or is legally incompetent. This exception does not apply in the case that application for access is made by obliged entities that are credit and financial institutions or by the responsible Supervisory Authority, Financial Intelligence Unit, Customs and Excise Department, Tax Department and the Police.
Five (5) years after the date of removal of a registered express trust, access to the information contained in the Trusts’ Registry is permitted only in the course of administrative or criminal enquiry conducted by the Supervisory Authority, Unit, Customs and Excise Department, Tax Department and the Police.
In conclusion and considering the new reporting obligations of the 5th AML Directive, it appears that in a corporate structure where the shareholder is a trustee of an express trust and not a nominee shareholder or the BO directly, the BO(s) should not be reported in the BO registry but rather in the Trusts registry, thus limiting the information on ownership to those with a proven legitimate interest while complying with the provisions of the Law.
Benefits of a trust:
A trust, besides the added confidentiality aspect, can also be considered to be a versatile instrument with many more benefits to those who wish to use such arrangement either as a stand-alone structure or embedded in a corporate structure. Trusts can serve many purposes in a family’s or an individual’s financial, retirement, estate and tax planning and can ensure that assets are professionally managed across generations and distributed in line with the settlor’s wishes.
The use of a trust arrangement may, for example, remove assets from one’s estate, allow for the carrying out of a charitable intent, reduce income taxes, protect beneficiaries from spendthrift propensities, protect assets from becoming marital property in a divorce, protect assets from creditors, and provide lifetime income to one or more beneficiaries while providing the remainder interest to another generation of beneficiaries.