Businesses and other organizations must have registered their Ultimate Beneficial Owners (UBOs) with the Chamber of Commerce by March 27, 2022. If you haven't done so yet, now is the time to do so. Unfortunately, there is considerable confusion about who these UBOs are.

UBO

The Ultimate Beneficial Owner, or UBO, is the ultimate beneficial owner of a company. The definition of a UBO seems simple: any natural person with more than 25% shares, more than 25% economic interest, or more than 25% voting rights in a company. However, this may involve direct or indirect interests and/or rights.

In addition, someone who has actual control (without any shares or formal economic or voting rights) is also considered a UBO. This includes shareholder agreements or unregistered power of representation.

A company can therefore have multiple UBOs. However, certain companies do not have a UBO. In such cases, those who form the day-to-day management of the company are considered UBOs (so-called "pseudo-UBOs"). For companies, these are all members of the (statutory) board.

These rules quickly raise questions of interpretation. How should this relatively simple holding structure be assessed?

The grandmother company (X) has three natural person shareholders (A, B and C, 33,33% each), with ordinary shares and no special voting rights. The grandmother has a director (D, natural person).

The grandmother company (X) holds 100% of the shares in the parent company (Y). The parent company has two directors (E and F, natural persons).

The parent company (Y) holds 80% of the shares in the subsidiary (Z). The subsidiary (Z) has a director (G, a natural person).

Within this group there are no deviating agreements that would give someone actual control.

Who are the (pseudo)UBOs?

Indirectly, A, B, and C each hold an economic interest of 26.7% in Z (33.3% * 100% * 80%). They are therefore (economic) UBOs.

However, they cannot exercise voting rights at the general meeting of Z. The shareholder of Z is Y. Y is not a natural person and therefore not a UBO. Y is represented (at the general meeting of Z) by its directors E and F.

If E and F are each independently authorized to represent Y, each of them can independently exercise 80% of the voting rights within Z. Then E and F are also UBOs with regard to voting rights.

However, E and F can be dismissed by X (represented by D). D can be dismissed by the general meeting of X in which A, B and C do not each have a decisive vote, but each have more than 25%. Does this change the conclusion, do A, B and C have actual control in this respect?

If E and F are only jointly authorized to represent Y, neither of them can independently exercise voting rights within Z. This does not make them UBOs.

What if X had five shareholders, each with a stake of 20%? Is there then no UBO? Then G should be registered as a (pseudo)UBO.

And something a little more complicated?

In practice, there is no clarity about how the voting rights and actual control criteria should be interpreted. In an international setting, the interpretation of the same European directive and the local legislation implementing it also differ across Member States. Therefore, it is important to thoroughly analyze the situation within your organization and be well-informed about your registration.

Registration requirement

Since September 2020, companies have been required to register their ultimate beneficial owners in the Chamber of Commerce's UBO register. Organizations established after that date should already have registered their UBOs. Organizations are required to keep their registrations up to date. The deadline for registering a UBO is March 27, 2022. Failure to register on time can result in a fine of up to €21,750 (this amount may change annually). If there are aggravating circumstances, such as a combination of criminal offenses, criminal prosecution may also be pursued. This could include an incorrect UBO registration combined with forgery.

The registration requirement applies to all organizations registered with the Chamber of Commerce, unless the organization is exempt. Examples include:

• sole proprietorships
• listed private and public limited companies
• 100% subsidiaries of listed companies
• homeowners' associations
• legal entities in formation
• Foreign legal entities with only branches in the Netherlands ('branch offices').

Listed companies (and their 100% subsidiaries) are only exempt if 100% of the shares of the (grand)parent company are listed on a regulatory stock exchange that meets the necessary transparency requirements.

Registration process

The organization can handle its registration itself or have it done by a notary. The organization's representative must have the following information:

• DigiD;
• IBAN (account number) in the name of the authorized signatory, for a payment of 1 euro cent;
• Data of the UBOs;
• Documents relevant to the UBOs; and
• Copy of valid identification document of the UBOs.

Because it's a public register, data is made public. This information can be accessed by anyone, for a fee, through the Chamber of Commerce's trade register.
The data that can be viewed are:

• First and last name;
• Birth month and year
• Nationality;
• Country of residence; and
• The importance and size of the UBO within an organisation.

Experience shows that the Chamber of Commerce doesn't always agree with your information, perhaps because it's incomplete or because the Chamber of Commerce believes a registered UBO shouldn't be considered as such. It's therefore important that you inform yourself properly.

If you have any questions about registering UBOs with the Chamber of Commerce, please contact Tim Carapiet.