New directives in Cyprus this year require Cyprus companies and legal entities to register an ultimate beneficial owner as a part of initiatives to improve transparency within the European Union. Compliance with these regulations is crucial for maintaining healthy business practices legally and improving the structure and image of a company on a global platform.
The Aspen Trust Group discusses the components your business needs to know about ultimate beneficial owner (UBO) legislation and how to ensure your company meets compliance standards while maximizing risk assessment and corporate structuring advantages.
Ultimate Beneficial Owner (UBO) Legislation in Cyprus
The European Union has initiated several legislative steps towards better business transparency over the last few years. Key directives, such as the EU Fourth Anti-Money Laundering Directive, have been incorporated into domestic law in Cyprus.
The Council of Ministers of Cyprus decided on December 16, 2020 to designate the Registrar of Companies alongside the Official Receiver of the Ministry of Energy, Trade, and Industry as authorized authorities to collect information on the ultimate beneficial owner of both companies and other legal entities. The decision marked January 18, 2021 as the starting date for data collection, although it was reassigned to February 22, 2021 and further to March 12, 2021. Companies in Cyprus have now been given a 12-month grace period, effective from March 12, 2021 to register their ultimate beneficial owner information.
The online register was activated in March 2021 and became connected to a centralized EU platform.
What is an Ultimate Beneficial Owner?
In short, an ultimate beneficial owner is the ultimate owner of a company in the form of a legal person, (individual), Trust, Foundation or listed entity. Financial institutions and companies in Cyprus must disclose this information to counter terrorist financing or financial crimes such as money laundering.
The transparency and integrity of business and financial endeavors have become a key issue globally. Not only does this enhance business relationships but also it improves the reputation of companies among customers. UBO screening is an important part of successful business arrangements and quality business practices.
Companies should assess which natural person or entity is the ultimate beneficiary when a transaction is conducted to determine the ultimate beneficial owner. Thus, the person on whose behalf institutional transactions are made and therefore benefit. This further includes persons with ultimate effective control legally over others or the business arrangement.
Defining, Screening, and Registering an Ultimate Beneficiary
Depending on the business arrangement and structure, the information required to submit will have notable differences. This guide helps you understand the base requirements of the new legislation. To get more detailed information and assistance, contact the professionals at The Aspen Trust Group to quickly and correctly comply with the new law.
By law, an ultimate beneficial owner is a person or entity with direct or indirect control of a company by holding more than a quarter (25%) of the company’s shares. This may occur directly or through intermediaries. This person is deemed as having control of the company’s activities.
In cases where an ultimate beneficial owner cannot be established per the legal criteria, the natural person in the senior management position will be recognized as the UBO.
All Cyprus companies will need to collect information and submit it to the Registrar for each ultimate beneficial owner.
- The following information must be accurate and complete per Cypriot law:
- Name and surname
- Date of birth
- Address of residence
- The interest and participation method in company activities
- Identification documents (number and country of issue)
- Date of entry as UBO, and any changes such as date of the end as UBO
Trusts & Listed Companies
Cypriot Companies listed on the Cyprus Stock Exchange are exempt from the obligation to submit the relevant data. In the event that one or all shareholders are listed companies, only the Name of the Company; the registration Number; the country of jurisdiction and the nature and extent of the beneficial interest is submitted.
If the beneficial owner of a Cypriot Company is a Trust, the UBO is mostly defined as the person or class whose main interest sets up or operates the legal arrangement or entity of the Trust. This could also be the natural person with ultimate control over the trust and carries a certain degree of direct or indirect ownership. In this case only the Name of the Trust; its registration number (if any), country of jurisdiction and the nature of and extent of the beneficial interest, must be submitted.
Foundations and other similar arrangements also follow the same logic for establishing the UBO.
Companies that are listed on a stock exchange are required to fulfill EU disclosure laws and are thus exempt from this UBO legislation. Companies in liquidation or are foreign companies are also excluded from disclosure obligations.
Open Information after Registration
From March 2021 to March 2022, the first twelve six months of the program, the interim platform will only be accessed by competent governmental authorities after an approved request. It is expected that during March 2022, companies will need to confirm the information submitted to the Registrar before the release of the permanent platform.
Once the permanent platform has been established, a fixed fee of 3.50 Euros per company profile will allow for data visibility. The information available includes full name, birth date, national, residential country, company share, and method of acquiring shares.
Registration Time Frame
At the time of the new legislation, established companies have from March 12, 2021 to mid-March 2022 (twelve months) to collect and register ultimate beneficial owner information.
For new companies formed after March 12, 2021, the deadline to disclose information with the Registrar is 30 days from the registration date of the company.
The Cypriot company and its officers are responsible for the registration and accuracy of the data. An identification code should first be obtained through Ariadne, the Cyprus government portal, before recording ultimate beneficial owner details.
How Does Ultimate Beneficial Ownership Benefit a Company?
While compliance with Cypriot laws is important, companies also need to know who they are interacting with in their business partners, clients, and customers. Knowing the ultimate beneficial owner of these entities allows for greater business relationship analysis for anti-corruption measures and red flag indicators.
Government- and foreign-backed entities could pose a high risk for companies in Cyprus who wish to avoid certain interests-based endeavors and steer clear of corruption, money laundering, and terrorist financing issues.
Risk Assessment and Corporate Structuring with The Aspen Trust Group
Not only is compliance with Cypriot law and EU regulations a smart move for corporate entities, but also it offers companies a better business relationship among partners, clients, and potential clients. Transparency is key for establishing authenticity and trustworthiness in the business landscape.
Let The Aspen Trust Group provide you with peace of mind through the process of risk assessment and corporate restructuring opportunities so that your business can be confident and secure with the registration of its ultimate beneficial owner. We deliver quality services with the utmost professionalism and ensure that your Cyprus company stays ready for its next big step. Contact us to get started!