Currently, the rules regarding submitting and updating information on the ultimate beneficial owners of legal entities (hereinafter – "UBO") and the ownership structure continue to be applied in Ukraine. Despite the deferral of the need to update the respective information due to the introduction of martial law in Ukraine, the need to submit such information when establishing a legal entity or during state registration of changes remains in force.
In this regard, to meet the requirements for the continuation of negotiations on Ukraine's accession to the EU, on September 6, 2022, the Verkhovna Rada of Ukraine adopted Law No.2571 (hereinafter – "Law"), which significantly changes the rules for disclosing information on the UBO and introduces certain novels, in particular, the possibility of bringing the founders of legal entities to the responsibility for failing to provide information on the changes of the UBO or the ownership structure of the legal entity.
The fundamental changes introduced by the Law are described in detail below.
THE SHAREHOLDERS OF THE LEGAL ENTITY WILL BE RESPONSIBLE FOR NOT PROVIDING AN INFORMATION ON THE UBO AND THE OWNERSHIP STRUCTURE
The new Law imposes an obligation on the founders of a legal entity (both legal entities and individuals), as well as persons exerting a decisive influence on such legal entity, to submit, at the request of the respective legal entity, information required for updating the data on the UBO and the ownership structure within five business days from the moment of receiving the respective request.
In addition, the shareholders of the legal entity (both legal entities and individuals), as well as persons exerting a decisive influence on such legal entity, have an obligation independently to notify the legal entities of the changes in the UBO and/or the ownership structure of the legal entity within five business days from the date of such change.
In case the legal entity did not submit (or did not submit in time) information on the UBO or the ownership structure due to the failure to provide such information by the shareholders of the company, such legal entity is released from liability for not submitting (or not submitting in time) this information. The whole scope of the responsibility in such a case is born by the shareholders. For failure to provide such information, shareholders (residents of Ukraine) are subject to a fine in the amount of UAH 17 000 to UAH 340 000.
Moreover, the new Law requires mandatory submission of information about all available citizenships (nationalities) of the UBO.
THE LIST OF LEGAL ENTITIES WHICH ARE NOT REQUIRED TO SUBMIT AN INFORMATION ON THE UBO AND THE OWNERSHIP STRUCTURE IS EXTENDED
Thus, the Law extended the respective list of the legal entities which are not required to submit information on the UBO and the ownership structure. In particular, the following kinds of legal entities were added to the updated list:
- Lawyers’ bureaus;
- organizations performing professional self-governance in the notary field;
- public companies (legal entities established in the form of a public joint-stock company, the shares of which are admitted to trading on at least one stock exchange (regulated market) from the list of foreign stock exchanges (regulated markets), which is formed under the procedure determined by the Government, to which the requirements on disclosure of information on ultimate beneficial owners are applied, equivalent to those adopted by the European Union);
- state pension funds;
- housing and construction cooperatives, country house (cottage and construction) cooperatives;
- gardening and garage (garage-building) cooperatives (companies);
- associations of residential building owners;
- agricultural cooperatives entered in the Register of non-profit institutions and organizations;
- agricultural cooperative associations;
- separate structural subdivision with the status of a legal entity (except for a separate subdivision of a foreign non-governmental organization).
Instead, religious organizations and organizations of water users were excluded from the respective list.
THE NEED TO SUBMIT INFORMATION ABOUT UBO WHEN CARRYING OUT CERTAIN REGISTRATION ACTIONS IS CANCELED
Submission of information about the UBO and the ownership structure is no longer required upon:
- state registration of the transfer of the private law legal entity to the activity based on a model charter;
- state registration of the transfer of the legal entity from the activity based on a model charter to the activity based on its own constituent document;
- state registration of the legal entity termination as a result of its reorganization;
- state registration of the establishment of a legal entity’s separate subdivision;
- state registration of changes to the information on the separate subdivision of the legal entity;
- state registration of the termination of a legal entity’s separate subdivision.
THE REQUIREMENT REGARDING ANNUAL REPORTING ON THE UBO IS CANCELED
The new Law terminates the requirement to submit information on the UBO and the ownership structure to the registrar every year. However, it still requires keeping the respective information updated. In this regard, it is required to update information on the UBO and the ownership structure in the following cases:
- in case of changing the information on the UBO or the ownership structure – within 30 business days from the date of such changes;
- during state registration of certain changes in the information about the legal entity (change of director, location, the amount of authorized capital, the composition of shareholders, etc.) – during state registration of the respective changes;
- in case of discrepancies in information about UBO – to notify the registrar and correct the respective mistakes – within three business days from the day of its detection.
In addition, instead of the previously postponed for the period of martial law informing on the UBO and the ownership structure, which had to be carried out until July 11, 2022, new rules for reporting on the UBO and the ownership structure have been introduced.
Therefore, companies registered under the previous rules without informing the registrars on the UBO and the ownership structure are obliged to submit such information:
- within six months from the date of the entry into force of the Provision on the form and substance of the ownership structure and the Methodology for determining the ultimate beneficial owner by the legal entity;
- but in any case not earlier than 90 days after the end of martial law, if the aforementioned documents are accepted earlier.
The respective Provision and Methodology shall be approved by the State Financial Monitoring Service – for most legal entities, as well as by the NBU and the NSSMC – for the legal entities which are regulated by these bodies.
DOCUMENTS CAN BE CERTIFIED BY USING AN ELECTRONIC SIGNATURE
The Law envisages the possibility of certifying a copy of documents identifying the UBO person (domestic or foreign passport or another document) by using the means of a qualified electronic signature. In this case, the certification of the document shall be carried out not earlier than 90 days before the date of the documents’ submission for state registration.
UPDATED LIABILITY FOR FAILURE TO REPORT INFORMATION ON UBO
Previously, before the adoption of the Law, for non-submission or late submission of information on the UBO (or on the absence of such one), the imposition of a fine in the amount of 17 000 to 51 000 UAH (Article 16611 of the Code of Administrative Offenses) was prescribed. The respective fine was imposed on a person authorized to act on behalf of a legal entity. Moreover, during the period of martial law and within three months after its termination, such liability does not apply at all.
Currently, after the adoption of the Law, for including by authorized persons of deliberately false information about the UBO or its absence in the documents which are submitted for state registration, a fine in the amount of 17,000 to 340,000 UAH is imposed on the legal entity, in respect of which such state registration is carried out.
The same fine in the amount of 17,000 to 340,000 UAH is directly prescribed for the legal entity for non-submission or late submission of information on the UBO.
Prosecution of persons for violations related to the submission of information on the UBO and the ownership structure is carried out by the Ministry of Justice of Ukraine, which also establishes the procedure for such prosecution and determines the amount of fines for such actions.
WHEN WILL THE CHANGES ENTER INTO FORCE?
Changes regarding the procedure on updating and submitting information about the UBO and the ownership structure enter into force three months after the official publication of the Law.
The exceptions are only provisions requiring the prior development of a special Procedure by the State Financial Services, which regulates the transfer of information on the subject of primary financial monitoring, which revealed discrepancies in the data regarding the UBO.