Newsletter No.8 - April 2021

Cyprus: Beneficial Owners Register active as from 16/03/2021

In 2018 the European Council issued the Directive 2018/843 – the 5^th AML Directive– pursuant to which, EU Member States are required to establish a register of beneficial owners and all legal entities have the obligation to register their beneficial owners in the publicly accessible register of beneficial owners. The 5^th AML Directive has been harmonised in the Cypriot legal system via the 2021 amendment of the Prevention and Suppression of Money Laundering Activities Law enacted on 23 February 2021 (hereinafter the "AML Law").

As a result, companies and other legal entities registered in the Republic of Cyprus, should obtain adequate and accurate information of their beneficial owner(s) and update them frequently in case of any alteration. Thereafter, such information should be submitted with the Central Register of Ultimate Beneficial Owners of Companies and Other Legal Entities which has been established (hereinafter the "Register") and kept by the Department of Companies Registrar and Official Receiver (hereinafter the “Cyprus Registrar of Companies”), which, according to the announcement of the Cyprus Registrar of Companies of 12/03/2021 as well as the respective Directive of the Cyprus Registrar of Companies (Κ.Δ.Π. 112/2021) issued on the 12/03/2021 (hereinafter the “Directive”), has been put into operation on the electronic platform of the Cyprus Registrar of Companies since 16/03/2021.

The operation of the Beneficial Owners Register in Cyprus, is a major step towards enhancing transparency of ownership of Cypriot entities, thereby taking a forward stance and strengthening the framework for the combat against money laundering and terrorist financing. 

Key Definitions

i)              Register of Ultimate Beneficial Owners

The Register of Ultimate Beneficial Owners is a centralised register which contains information regarding the beneficial owners of companies or entities which are registered under Cypriot Law. The Register is interconnected through the European Central Platform established under the provisions of paragraph (1) of Article 22 of Directive 2017/1132 and the information regarding the beneficial owners contained therein, shall be available via the European Central Platform.

ii)             Beneficial owners

According to the AML Law, a “beneficial owner” is a physical person who has the final possession or control of a legal entity and/or a physical person on whose behalf a transaction or activity is carried out and includes the following:

• A physical person who has the final control of a legal entity, meaning that that person holds more than 25% plus one (1) shares or sufficient voting rights or ownership interest over twenty-five percent in terms of direct ownership

• Holdings of more than 25% plus one (1) share or ownership interest of more than twenty-five percent (25%) of a legal entity under the control of a physical person or persons or by several legal entities under the control of the same physical person or persons for indirect ownership.

iii)            Senior Managing Officials

In case where no person can be identified as a beneficial owner (e.g. shareholders which are public companies listed on a regulated market), after exhausting all the possibilities, the natural person who holds the position of senior management official in the legal entity can be registered as a beneficial owner in the Register. A person in the position of senior management is a physical person who is on the board of directors of an entity and/or who performs executive functions therein, who is responsible and accountable to the board of directors for the day-to-day management of the legal entity.

iv)            Trusts

In the case of a trust, the “beneficial owners” are considered the following:

• The settlor,
• The trustees
• The protector, if any,
• The beneficiaries or a class of persons benefitting from the legal arrangements, in case the individuals have not been determined yet,
• Any other natural person controlling the trust by direct or indirect ownership or by other means.

(Control via other means may include a shareholder’s agreement, the exercise of dominant influence, influence through family connections or other types of connection with decision-makers, the holding of negotiable shares or convertible stock, and the power to appoint senior management or any other way).

In case of foundations, or any other similar legal entities, equivalent definitions apply.

Legal Entities required to register Beneficial Owners

The following entities are obliged to enter information regarding their beneficial owners in the Register:

• Private companies limited by shares or by guarantee, incorporated under the Companies Law, Cap.113;
• European Public Limited Liability Companies, incorporated under the Companies Law, Cap.113;
• All other entities registered with the Cyprus Registrar of Companies.

The following entities are excluded from the scope of the Directive; hence they do not have the obligation to submit information regarding their beneficial owners:

• Companies listed on a regulated market which are subject to disclosure requirements consistent with Union Law;
• Entities which are subject to equivalent international standards which secure adequate transparency of ownership information;
• Companies whose directors delivered an application for strike off pursuant to Article 327 (2A) (a) of the Companies Law, prior to the commencement of the Directive;
• Companies whose liquidation has been initiated before the commencement of the Directive;
• Overseas companies.

Information required to be submitted

The information required to be entered in the Register for ultimate beneficial owners who are physical persons are:

• Name, surname, date of birth, nationality and residential address,
• Type of beneficial interest held directly or indirectly by each beneficial owner, including through percentage of shares, voting rights, or the nature and extent of the Significant influence or control with other means exercised by each controlling person
• Identification document number indicating the type of document and the country of document issuance (Identity card or passport),
• Date that the natural person was registered as a beneficial owner and
• Date that changes occurred in the particulars of the natural person or the date the natural person ceased to be a beneficial owner.

In the case of a Trust or Foundation, the information that needs to be submitted is limited to the following, despite the respective definition above mentioned:

• Name of the Trust or Foundation,
• Registration number,
• Country of Jurisdiction,
• The nature and extent of the beneficial interest held directly or indirectly by each beneficial owner, including the percentage of shares, voting rights or the nature and extent of Substantial influence or control by other means exercised by the auditor,
• Date on which the Trust, Foundation, Other similar legal arrangements and listed company were entered in the register as the beneficial owner and
• Date on which changes in the details of a Trust, Institution, Other similar legal arrangements or the date on which the beneficial owner ceased to be.

People who have access to the information submitted to the Register of Ultimate Beneficial Owners

• At the present stage, as the Register in the form that it has been established in Cyprus, it has been characterised as an interim solution, the persons who will have fast and unlimited access by electronic means to the information regarding the ultimate beneficial owners of companies and other legal entities, which will be kept in the Register will be the Cyprus Competent Supervisory Authorities, MOKAS, Customs Department, Taxation Department and the Police. This means that the "search" function on the electronic platform of the Register is at present not activated for the “obliged entities” (as defined in the AML Law) and the “members of the general public”.

• At a later stage, “obliged entities” shall have quick access by electronic means only to the name, month and year of birth, nationality and country of residence of the beneficial owner, as well as the type and extent of rights he holds, in the context of performing a due diligence and identification measures for clients, subject to its prior electronic registration, as will be determined in a directive to be issued by the Cyprus Registrar of Companies for this purpose, and the payment of a fee of three euros and fifty cents (€3,50) per company or other legal entity.

• Furthermore, at a later stage, any member of the general public shall have access by electronic means only to the name, month and year of birth, citizenship and country of residence of the beneficial owner, as well as the type and extent of the rights he holds, provided of its previous electronic registration, as will be determined in a directive to be issued by the Cyprus Registrar of Companies for this purpose, and the payment of a fee of three euros and fifty cents (€ 3.50) per company or other legal entity.

Timeframe for Completion of Entries

• A company or other legal entity which was established or registered before 16/03/2021, no later than six (6) months from the date of issuance of the Directive, must submit to the Cyprus Registrar of Companies by electronic means, the information required for the beneficial owners of the company or other legal entity.

• A company or other legal entity which was established or registered after 16/03/2021, no later than thirty (30) days from the date of its establishment or registration, must submit to the Cyprus Registrar of Companies by electronic means, the information mentioned above for the beneficial owners of the company or other legal entity.

According to the Directive, the responsibility for the true and correct submission of information in the Register referred to in paragraphs 8, 9 and 10 of the Directive, lies with the company or other legal entity and each of its officials.

Sanctions

In case of non-compliance by any company and/or its official with the above obligations, regardless of any criminal sanctions that may apply, there may be administrative financial penalties starting with a financial charge of two hundred euros (€ 200) and a further financial penalty of one hundred euros (100 euros) each day of continuation of the violation with a maximum charge of twenty thousand euros (€ 20,000).

How to submit data in the Register

• A company or other legal entity, as well as any of its officials, must be registered as a user through the ARIADNI Government Gateway Portal (as a user itself), in order to gain access on the electronic registration system of ultimate beneficial owners of companies and other legal entities of the Cyprus Registrar of Companies. Existing authorisation codes used on the electronic system of the Cyprus Register of Companies do not function in conjunction with the Register’s electronic registration system.

For more information, please contact Mrs Eleni Tzioni at eleni@tzionilaw.com.cy and on +357 22932293.

The above material has been prepared with the intention of being a general guide only, and its application to specific situations will depend on the particular circumstances involved. Accordingly, we recommend that readers seek appropriate professional advice regarding any particular situation that they encounter. This information should not be relied upon as a substitute for such advice. While all reasonable attempts have been made to ensure that the information contained herein is accurate in accordance with laws and regulations applicable on the date it has been issued, E. Tzioni & Associates LLC accepts no responsibility for any errors or omissions it may contain whether caused by negligence or otherwise, or for any losses, however caused, sustained by any person that relies upon it.