Clarification of the Dutch UBO-definition
On 6 April 2018 the Minister of Finance published the draft Dutch Anti Money Laundering and Terrorism Financing Decree (the Decree). The Decree stipulates which individuals should in any event be considered as ‘ultimate beneficial owners’ (UBO’s) of legal entities in the Netherlands. We refer to our newsletter of 31 January 2018 on the consultation version of this Decree.
The UBO-definition in the Decree is of relevance in the implementation of the Dutch UBO-register’. The UBO-register will contain details on the individuals that are the ‘ultimate beneficial owners’ (UBOs) of legal entities in the Netherlands.
Although the UBO-definition in the Decree is not the final implementation of the UBO-definition for purposes of the UBO-register, the definition in the Decree will materially correspond with the UBO-definition that will apply for UBO-register purposes. It should be noted though that the UBO-register will not include some legal entities that are included in the Decree.
The Dutch law implementing the UBO-register is expected to be sent to Parliament in the first half of 2018.
Fourth EU Anti-Money Laundering Directive
The introduction of a UBO-register is one of the measures included in the fourth EU Anti-Money Laundering Directive (we refer to our newsletter of 3 April 2017). In addition to the mandatory implementation of a UBO-register, the EU Anti-Money Laundering Directive requires legislation for intermediaries such as bankers, accountants, lawyers, tax advisers and notaries to conduct client due diligence prior to entering into a business relationship with their potential client.
For each type of legal entity the Decree defines which individuals must in any event be considered a UBO. The Dutch government emphasizes that the enumeration is not exhaustive and that legal entities may have more than one UBO.
Below, we will exemplify which individuals must in any event be considered a UBO under the Decree for a Dutch NV, BV, foundation and limited partnership. A UBO-definition for other partnerships, associations and trusts is included in the Decree as well.
- In case of NV’s and BV’s: UBO’s are the individuals that directly or indirectly hold more than 25% of the shares, voting rights or the ownership interest in the company, or that through other means ultimately own or control the company. If a natural person holds a sufficient ownership interest in a corporate entity through depository receipts issued by a Dutch foundation (stichting administratiekantoor), the individual will still qualify as UBO. If no individual can be identified, or if there is any doubt whether the individual(s) identified are the beneficial owner(s), the individual(s) who hold the position of senior managing official(s) will be considered the UBO(s). The terms “ownership interest” and “senior managing official” are clarified below. The UBO qualifications do not apply if the company is subject to certain publication requirements for listed companies, or if the company is a 100% subsidiary of such listed company.
- In case of foundations: in deviation from the fourth EU Anti-Money Laundering Directive, the UBO of a foundation is not determined by reference to the UBO definition of trusts and similar entities, but by reference to the UBO definition of “other corporate entities”. Background thereof is that a foundation in the Netherlands has legal personality and is more comparable to other corporate entities in form and function than to trusts. UBO’s of a foundation are therefore the individuals that directly or indirectly have an ownership interest of more than 25%, that can exercise more than 25% of the voting rights in respect of changes of the articles of the foundation, or that can exercise effective control over the foundation. If no individual can be identified, or if there is any doubt whether the individual(s) identified are the beneficial owner(s), the individual(s) who hold the position of senior managing official(s) will be considered the UBO(s).
- In case of limited partnerships: UBO’s are the individuals that directly or indirectly have more than 25% ownership interest in the partnership, that directly or indirectly can exercise more than 25% of the voting rights in respect of (i) changes of the limited partnership agreement or (ii) in respect of the execution of that agreement other than through deeds of management to the extent that decision making by majority vote is required in that agreement, or (iii) that can exercise effective control over the limited partnership. If no such individual can be identified, or if there is any doubt whether the individual(s) identified are the beneficial owner(s), the individual(s) who hold the position of senior managing official(s) will be considered the UBO(s). In the aforementioned cases, an ownership interest exists if an individual is entitled to distributions of profits or reserves of an entity, or is entitled to the balance in case of liquidation. Senior management officials in these cases are the directors (statutory board members) of an entity, or, in the case of a limited partnership, the general partner(s).
Fifth EU Anti-Money Laundering Directive
The Dutch law implementing the UBO-register is expected to be sent to Parliament in the first half of 2018. The law implementing the UBO-register and the aforementioned Decree are both based on the fourth EU Anti-Money Laundering Directive.
In the meantime the European Parliament, the Council and the Commission reached an agreement on the proposal for a directive amending fourth EU Anti-Money Laundering Directive. In accordance with this agreement, the UBO threshold (25% plus one) will not be lowered and all EU UBO-registers must be accessible to the general public. These amendments are in keeping with published outlines of the Dutch UBO-register.
Finally, all EU member states must provide for a UBO-register for trusts that are established in, are residing in, are managed in or enter into certain business transactions in that member state. The UBOs of a trust are the settlor(s); the trustee(s); the protector, the beneficiaries and any other individual exercising ultimate control over the trust by other means. The UBO-register for trusts will only be available for persons who have a legitimate interest.
If you have any question regarding the UBO-register please contact your Loyens & Loeff consultant or one of our consultants on the Family Owned Business & Private Wealth Team. We will gladly help clarify the effects of the UBO-register for you specific situation.