#AUGUST 2017 – Corporate Law Newsflash – The register of beneficial owners
The register of beneficial owners
A new obligation for entities registered with the Trade and Companies Register: the register of beneficial owners. Such a register is required, with effect from August 1, 2017, pursuant to the terms of Decree 2017-1094 of June 12, 2017.
In a context where the fight against money laundering and financing of terrorism is a growing concern, a European directive has created an obligation to identify the “beneficial owners” of entities registered with the Trade and Companies Register (the “RCS“). The term “beneficial owner” is currently defined in Article R561-1 of the Monetary and Financial Code as “the individuals (i) who either directly or indirectly hold more than 25% of the share capital or voting rights, or (ii) who by any other means, exercise a power of control over the administrative, management or governance bodies of the entity or the General Meeting of its shareholders”. This definition may be supplemented or amended by a future decree.
It should also be noted that the Decree dated June 12, 2017 is likely to conflict with Law No. 2016-1691 of December 9, 2016 (known as the Sapin II law) providing for similar provisions, but for which no decree has been published to date.
Under the Decree of June 12, 2017, such identification shall take the form of a “document relating to the beneficial owner, containing the identification information and personal domicile of the latter as well as a description of the control thus exercised and date when the said individual became a beneficial owner”, to be filed with the Registry. All the information to be provided in this document is set forth in Article R561-56 of the French Monetary and Financial Code.
This document may in particular be consulted by magistrates, officials of the general directorate for public finances, customs authorities, by any member of the prudential and resolution authority and any other person with a legitimate interest and duly authorized by the judge appointed to supervise the RCS.
This obligation concerns legal entities whose registration with the RCS is required, including the French establishments of foreign companies.
The obligation does not apply to individuals having the status of merchant, French public industrial and commercial establishments, as well as most listed companies, i.e. those whose securities are admitted to trading on a regulated market in France or in another State party to the Agreement on the European Economic Area or in another country imposing obligations recognized as equivalent by the European Commission within the meaning of Directive 2013/50/EU.
Entities subject to the new provisions and registered with the RCS before the coming into force of the Decree (August 1, 2017) have until April 1, 2018 to comply with the new provisions. However, those registered from August 1, 2017 must file the above-mentioned information with the Registry at the time of the registration application or at the latest within fifteen days from the issuance of the official business creation document.
These new provisions require shareholder monitoring by the entities concerned and updating of the information with the RCS.
Criminal sanctions are provided for in the Decree, which will be imposed on the entities and their managers. Thus, non-compliance with these provisions can be punishable with up to 6 months imprisonment and a 7,500 euro fine, plus management prohibition, partial deprivation of civil rights and an injunction to comply.