Update on the draft bill introducing the Luxembourg UBO register
On 6 December 2017, a Luxembourg draft bill of law was published (draft Bill) regarding the introduction of a central ultimate beneficial owner (UBO) register in Luxembourg.
The draft Bill is based on the Fourth Anti-Money Laundering Directive (2015/849/EC, the Directive), which aims to prevent money laundering and terrorism financing by among others introducing a register identifying the UBO of corporate entities, trusts and other legal entities. A separate draft bill was issued to introduce a register for trusts. Such register would only be available for Luxembourg national authorities and is not further dealt with below.
1. Principles of the draft Bill
1.1 UBO register
Pursuant to the Directive, all EU member states need to adopt a central register in which the UBO of corporate entities, trusts and other legal entities is identified.
The Directive lays down minimum requirements for the UBO register. Every EU member state determines the specific implementation of the UBO register. With this in mind, the Luxembourg government has adopted the draft Bill which closely follows the Directive.
What needs to be identified for the Luxembourg UBO register are the UBOs of companies and other legal entities that are established in Luxembourg.
1.2 Who is UBO?
As a rule, UBOs who need to be reported in the Luxembourg UBO register are defined in the same way as under the Directive, being the natural persons who ultimately own or control the legal entity and / or the natural persons on whose behalf the transaction is executed or the business relationship is entered into.
Natural persons hiding behind intermediaries also qualify as UBOs. Broadly speaking this includes natural persons who benefit or will benefit from the transaction or business relationship and who, directly or indirectly, have the power to decide on the execution of the transaction or the business relationship and / or to determine or to agree to the modalities thereof.
The beneficial owner shall mainly include:
- any natural person who ultimately owns or controls a legal entity through direct or indirect ownership or control over a sufficient percentage of the shares or voting rights in that legal entity, including through bearer share holdings, other than a company listed on a regulated market that is subject to disclosure requirements consistent with Community legislation or subject to equivalent international standards; a percentage of more than 25% shall be deemed sufficient to meet this criterion;
- any natural person who otherwise exercises control over the management of a legal entity;
1.3 What data will be included in the UBO register?
The Luxembourg UBO register will contain the name, date and place of birth, nationality and the country of residence, the exact private address or exact professional address of the UBO and the identification number for the individuals registered in the Luxembourg Register of Natural Persons (or for non-resident individuals their national identification number, e.g. the number of the ID card).
Finally, detailed information on the nature and the extent of the beneficial interest held should also be included in the UBO register.
1.4 Who has access to the UBO register?
The UBO register should be maintained by the Luxembourg trade and companies’ register (RCS), although being separated from the register containing more general information on companies (such as annual accounts, by-laws, etc.). Luxembourg national authorities and professionals that need to comply with laws and regulations on money laundering and terrorism prevention would have direct (electronic) access to the Luxembourg UBO register.
For persons “having a legitimate interest”, a motivated request will have to be filed with the RCS to obtain access to the UBO register, on an entity-by-entity basis. This request should demonstrate the legitimacy of the interest in obtaining the requested information. The RCS shall transmit the request to a newly formed governmental commission (commission de coordination) and to the entity concerned. This entity may object against disclosure of the information requested, but needs to motivate why (we may think about endangerment of personal safety). Following this process, the governmental commission would agree on whether to disclose the requested information or not.
A member of the Luxembourg government has clearly stated that journalists could not be excluded from the group of persons having a legitimate interest.
Finally, the draft Bill explicitly makes reference to the importance of the protection of personal data, based on the EU regulation regarding the protection of natural persons with regard to the processing of personal data. It is not clear to us how this statement should be interpreted in light of the above.
1.5 Who should be liable for reporting the UBO information?
All Luxembourg legal entities are required to collect and hold information on their UBOs, which needs to be accurate and up-to-date (which means any relevant change should be reflected within one month).
The draft Bill provides for fines between EUR 1,250 and EUR 1,250,000 which could be imposed to the legal entity or its legal representative that do not comply with the aforementioned obligations. Legal representatives (whether based in Luxembourg or elsewhere) of any concerned entity should therefore closely monitor the fulfillment of such obligations.
2. Implementation in the Luxembourg legislation
With regard to the legislative process, after being examined by the Council of State, the draft Bill will be put to the vote before Parliament, which could be considered a mere formality as the government holds a majority in the Parliament. After the parliamentary vote, the Grand Duke exercises his rights of assent and of enactment.
The legislative procedure concludes with the publication of the legislative text in the Mémorial, whereupon the text acquires legal status.
We expect the legislative process to take a few weeks/months leading to a publication in the Mémorial in the course of next year.
Do not hesitate to contact your regular adviser if you have any questions.