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Stricter rules on beneficial owners as of 10 January 2020

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Legal news
calendar 13 November 2019
globus Denmark

The new year starts with new obligations for legal entities to obtain, store, record and update information about their beneficial owners. The new rules will increase companies’ risk of compulsory dissolution. Therefore,  it is important to ensure compliance with the current as well as the new rules.

The duty to register beneficial owners

Since May 2017, all Danish legal entities have been obliged to review information regarding their beneficial owners and register the beneficial owners in the Danish CVR-register. The duty to register beneficial owners is a consequence of the increasing focus on restricting money laundering and terrorist financing. Through different initiatives as it has become easier for the police to investigate financial crime. From 10 January 2020 additional rules on beneficial owners are coming into force, see below.

Earlier on, we have mentioned the duty to register beneficial owners here.

Stricter rules from 10 January 2020

On 10 January 2020, additional obligations regarding beneficial owners will take effect. The new rules contain obligations for legal entities and, as something new, rules that contain obligations for the beneficial owners have been introduced. In addition, the Danish Business Authority is given a significantly wider permission to compulsorily dissolve companies that do not comply with the rules.

Annual review and update of the beneficial owners

As a part of legal entities’ obligation to obtain and record information about their beneficial owners, legal entities must at least once a year ensure that the information recorded is correct. This duty will from now on be expressly stated in a new provision in the Danish Companies Act and is expanded so that entities are obliged to present the result of the annual examination at the annual general meeting.

For corporations it is important to note that the duty to update not only applies to information on the beneficial owners, but also includes information on the company's ownership and control structure in general.

Compulsory dissolution as consequence

Until the new rules enter into force on 10 January 2020, the Danish Business Authority can only send a legal entity to a compulsory dissolution if the entity has not registered beneficial owners at all. According to the new rules, this power has been extended and, in the future, an incomplete or incorrect registration, a non-compliance of the storage obligation or non-compliance of the obligation to update ownership information (see above) can lead to a compulsory dissolution.

Duty to provide the company with necessary information

As something new, every legal and beneficial owner is obliged to provide the company with ownership information so the company can identify its legal and beneficial owners. Both legal and beneficial owners are, thus, required to provide a copy of their passport and address legitimation to the business of which the person in question is legal and/or beneficial owner. However, the new provisions do not impose a penalty on the legal and/or beneficial owner who does not comply with this obligation.

Information regarding “know your customer”

At the time of writing, there is no clear provision in Danish law which imposes legal entities to disclose their ownership relationships to other entities who, under the Danish Money Laundering Act, perform KYC procedures. A duty like this has now been introduced in the new Danish Companies Act and applies to corporations as well as to associations and foundations.

At the same time, entities covered by the Money Laundering Act are required to report discrepancies in information about the beneficial owners with whom they become aware of to the Danish Business Authority. The Danish Business Authority has, after consulting the legal entity concerned, among other things the option to compulsorily dissolve/delete the legal entity concerned.

IUNO believes

At IUNO, we believe that you need to pay attention to adhering to applicable rules, as well as adapting your procedures so you are already implementing the new rules in your daily routines. If you have any questions concerning the new rules or need help implementing new procedures, our team is always ready to assist you.

The duty to register beneficial owners

Since May 2017, all Danish legal entities have been obliged to review information regarding their beneficial owners and register the beneficial owners in the Danish CVR-register. The duty to register beneficial owners is a consequence of the increasing focus on restricting money laundering and terrorist financing. Through different initiatives as it has become easier for the police to investigate financial crime. From 10 January 2020 additional rules on beneficial owners are coming into force, see below.

Earlier on, we have mentioned the duty to register beneficial owners here.

Stricter rules from 10 January 2020

On 10 January 2020, additional obligations regarding beneficial owners will take effect. The new rules contain obligations for legal entities and, as something new, rules that contain obligations for the beneficial owners have been introduced. In addition, the Danish Business Authority is given a significantly wider permission to compulsorily dissolve companies that do not comply with the rules.

Annual review and update of the beneficial owners

As a part of legal entities’ obligation to obtain and record information about their beneficial owners, legal entities must at least once a year ensure that the information recorded is correct. This duty will from now on be expressly stated in a new provision in the Danish Companies Act and is expanded so that entities are obliged to present the result of the annual examination at the annual general meeting.

For corporations it is important to note that the duty to update not only applies to information on the beneficial owners, but also includes information on the company's ownership and control structure in general.

Compulsory dissolution as consequence

Until the new rules enter into force on 10 January 2020, the Danish Business Authority can only send a legal entity to a compulsory dissolution if the entity has not registered beneficial owners at all. According to the new rules, this power has been extended and, in the future, an incomplete or incorrect registration, a non-compliance of the storage obligation or non-compliance of the obligation to update ownership information (see above) can lead to a compulsory dissolution.

Duty to provide the company with necessary information

As something new, every legal and beneficial owner is obliged to provide the company with ownership information so the company can identify its legal and beneficial owners. Both legal and beneficial owners are, thus, required to provide a copy of their passport and address legitimation to the business of which the person in question is legal and/or beneficial owner. However, the new provisions do not impose a penalty on the legal and/or beneficial owner who does not comply with this obligation.

Information regarding “know your customer”

At the time of writing, there is no clear provision in Danish law which imposes legal entities to disclose their ownership relationships to other entities who, under the Danish Money Laundering Act, perform KYC procedures. A duty like this has now been introduced in the new Danish Companies Act and applies to corporations as well as to associations and foundations.

At the same time, entities covered by the Money Laundering Act are required to report discrepancies in information about the beneficial owners with whom they become aware of to the Danish Business Authority. The Danish Business Authority has, after consulting the legal entity concerned, among other things the option to compulsorily dissolve/delete the legal entity concerned.

IUNO believes

At IUNO, we believe that you need to pay attention to adhering to applicable rules, as well as adapting your procedures so you are already implementing the new rules in your daily routines. If you have any questions concerning the new rules or need help implementing new procedures, our team is always ready to assist you.

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Aage

Krogh

Partner

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Grønlund Jakobsen

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Skall Søby Nielsen

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