Companies and other organizations must have registered their Ultimate Beneficial Owners (UBO) with the Chamber of Commerce by March 27, 2022. If you have not done so yet, now is the right time to do so. Unfortunately, there is quite a bit of ambiguity about who the UBOs are.

UBO

The UBO is the Ultimate Beneficial Owner of a company. The rule of what constitutes a UBO seems simple, namely: every natural person with more than 25% shares, more than 25% economic interest or more than 25% voting rights in a company. This may concern direct or indirect interests and/or rights.

In addition, someone who has actual control (without any shares or formal economic or voting rights) will also be considered a UBO. Think of situations like shareholder agreements or an unregistered power of attorney.

A company may therefore have several UBOs. However, certain companies do not have a UBO. In that case, those who form the daily management of the company are designated as UBOs (so-called ‘pseudo-UBOs’). For companies, these are all members of the (statutory) management board.

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

The grandparent company (X) has three natural person shareholders (A, B and C, each 33.33%), with ordinary shares and no special controlling rights. The grandmother has one director (D, natural person).

The grandparent 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 company (Z).The subsidiary company (Z) has one director (G, natural person).

There are no deviating arrangements within this group that would give anyone actual control on that basis.

Who are the (pseudo) UBOs?

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

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

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

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 each do not have a casting vote, but each has more than 25%. Does this make the conclusion different, do A, B and C have actual control in this respect?

If E and F are only jointly authorized to represent Y, none of them can independently exercise the voting rights within Z. That would disqualify them as UBOs.

Now what if X had five shareholders, with each of them holding 20%? Is there no UBO then? Then G would have to be registered as a (pseudo) UBO.

And something more complicated?

In practice, there is no clarity as to how the voting right and actual control criteria should be filled in. In the international setting, the interpretation of the same European directive and local legislation implementing this directive is not uniform in the various member states. It is therefore important that you conduct a proper analysis of the situation within your organization and that you are prepared for your registration.

Registration obligation

Since September 2020, companies are required to register beneficial owners in the UBO register of the Chamber of Commerce. Organizations established since that date should already have performed a UBO registration. Organizations are required to keep their registrations up-to-date. The deadline for UBO registration is March 27, 2022. Failure to register on time may 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 offences, criminal law may also be enforced. This could include an incorrect UBO registration that goes hand in hand with fraud.

The registration requirement applies to all organizations that have 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
  • associations of owners
  • legal persons in formation
  • Foreign legal entities with only branches in the Netherlands (‘branch offices’).

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

Registration process

The organization can take care of its own registration, or have this done by a public notary. The organization’s representative must have the following information:

  • DigiD;
  • IBAN (bank account number) in the name of the signatory, for a payment of 1 euro cent;
  • Details of the UBOs;
  • Documents in the interest of the UBOs; and
  • Copy of valid ID of the UBOs.

Because it is a public register, data is made public. These can be viewed, for a fee, by anyone through the trade register of the Chamber of Commerce.

The data that can be viewed are:

  • First and last name;
  • Month and year of birth
  • Nationality;
  • Country of residence; and
  • The interest and size that the UBO has in an organization.

Experience shows that the Chamber of Commerce does not always agree with your statement, because it may not be complete or because the Chamber of Commerce believes that a registered UBO should not be considered as such. It is therefore important that you inform yourself well.

If you have any further questions on the registration of UBOs in the Chamber of Commerce, please contact our expert Tim Carapiet.