Implementation of a beneficial ownership register

A new register of beneficial ownership will be introduced as a stage in EU’s work to prevent money laundering and the financing of terrorism. Legal entities will now be required to register details regarding natural persons having control of a given company.

According to the Government’s proposal to the Council on Legislation, Swedish legal entities (limited liability companies, associations, trusts, etc.) and foreign legal entities undertaking operations in Sweden are to register information with the Swedish Companies Registration Office as to the individual/s comprising the ultimate beneficial owner for the legal entity in question. By the term beneficial owner is meant a natural person who ultimately owns or controls a legal entity, or a natural person in whose favor someone else is acting.

If a natural person, directly or indirectly, controls more than 25 percent of the votes in a company the presumption is that the person exercises control over the company and is, therefore, the beneficial owner of the company. This is also the case if a natural person has the right to appoint or terminate the appointment of more than fifty percent of the company’s Board members, or, due to agreements or similar circumstances, can execute such control over the company. In the assessment, the individual’s influence together with immediate family is also considered.

Those companies covered by the new law will be required to have reliable details as to who is the beneficial owner and as regards the nature and scope of this individual’s interest in the company. Companies are to also document these details and the investigation undertaken to determine the beneficial owner in question. At the request of the authorities, or in the case of employees in certain businesses, the company is to present the documentation referred to above. The company is also to present these details to the Swedish Companies Office for registration.

According to the Government’s assessment, in the majority of cases, it will be relatively simple for the companies to determine who the beneficial owner is and to document this assessment. The average cost for this investigation and assessment is expected, therefore, to be low.

According to the Government proposal, the details in the register will not be classified as secret, which implies that, similar to other registers with the Swedish Companies Office, the information in this new register will be public. In what extent the register is to be accessible to the public remains unclear since this will be settled in regulations.

The law is intended to come into effect on 26 June 2017 and all companies covered by the regulation must register their beneficial owner no later than 26 December 2017, that is, within 6 months from the date on which the law comes into effect. New companies are to register their beneficial owner no later than four weeks from the date on which the company is registered and changes in a company’s beneficial owner are to be registered without delay by the company concerned.

Comment

The proposal for a new beneficial ownership register creates some degree of concern regarding the balance between transparency and integrity. We have noted a certain degree of fear that the level of transparency will be unacceptable as the register could be used for criminal purposes. The forthcoming beneficial ownership register has, therefore, led to plans for restructuring of certain company groups. Currently, it is uncertain as to the degree of accessibility that will apply in terms of the public. According to our assessment, the aim of the register could be fulfilled even if the details in the register are not completely accessible to the public. The register can thus incur a somewhat limited access without reducing the authority’s access or the confidentiality of the details in the register.

Shortly, PwC will publish a new report regarding the effects and implementation of beneficial ownership registers within the EU.

Authors: Peter Hellqvist, Malin Börestam and Julius Lager