Disclosure of information about beneficiary owners in Ukraine: new rules of 2023

In this article, we set out up-to-date information on the rules for disclosing the ownership structure of companies in Ukraine in 2023.

Recently, the Law of Ukraine "On Amendments to Certain Laws of Ukraine on Improving the Regulation of Ultimate Beneficial Ownership and Ownership Structure of Legal Entities" came into force, which introduced a number of amendments to the relevant laws governing the procedure for disclosing information about beneficiary owners. We talk about the main of them later in the article, but first of all, we would like to give the definition of the beneficial owner in accordance with the current legislation of Ukraine.

The ultimate beneficial owner (hereinafter referred to as the UBO) of a legal entity is any individual who exercises a decisive influence on the activities of a legal entity (including through a chain of control/ownership).

At the same time, the law distinguishes two types of decisive influence on the activities of a legal entity, namely:

• direct decisive influence is the possession by an individual of a share in the amount of at least 25% of the authorized capital or voting rights, and

• indirect decisive influence is at least the possession by an individual of a share in the amount of at least 25% of the authorized capital or voting rights through related individuals or legal entities, or the exercise of decisive influence by exercising the right to control and dispose of the company's assets, the right to receive company income, the right to decisively influence the formation of the composition of management bodies, the conclusion of agreements that make it possible to determine the basic conditions of the company's business, as well as the adoption of binding decisions that have a decisive impact on the activities of the company.

At the same time, it should be noted that an individual who formally owns 25% of the authorized capital, but is actually a nominal owner or intermediary in respect of such a right, is not considered a UBO.

So, having determined who the ultimate beneficial owner is and what are the main characteristics of its influence on the activities of a legal entity, we proceed to consider the main changes that have occurred in the procedure for disclosing the UBO and ownership structure since December 2022.

Annual confirmation of UBO information is canceled

Previously, the law required to confirm information about the UBO annually within 14 calendar days from the date of state registration of a legal entity. According to the explanations of the Ministry of Justice, this rule should have worked just from 2023, but this Article is currently excluded from the law. It means that annual confirmation of information about the UBO is currently not required.

The documents on UBO disclosure are submitted only when certain registration actions are performed

Previously, information about the UBO was submitted when almost all registration actions were performed. However, today this list has been reduced to only three of them, namely, documents on the disclosure of the ownership structure and the beneficiary owners are submitted in the case of:

- registration of the establishment of a legal entity;

- registration of inclusion of the information about the legal entity to the state register, if the legal entity was registered before July 1, 2014;

- registration of changes of the beneficiaries, information on them, and changes of ownership structure.

At the same time, the list of documents required by law to disclose the ultimate beneficiary remained the same, namely, a scheme of the ownership structure is submitted, a document confirming the registration of a non-resident legal entity in the country of its location (for legal entities in which the founder is a non-resident legal entity), as well as an identity document of the ultimate beneficiary.

Notifications of changes in information about the beneficiary or ownership structure are submitted within 30 working days

In case of changes in the information on the UBO or changes in the ownership structure, the legal entity must submit the relevant supporting documents to the state registrar within 30 working days from the date of the changes. At the same time, in case of inaccuracies in the information about beneficiaries already submitted to the registrar, it is necessary to correct these inaccuracies by submitting the relevant documents to the registrar within 3 working days from the date of detection of the inaccuracy.

The document certifying the identity of the beneficiary and his citizenship must be certified no earlier than 90 days before the date of submission of the document for state registration

Previously, the law did not establish such a requirement for the UBO passport, but currently, state registrars will check compliance with the term of certification of this document. In addition, we would like to emphasize that according to the recent clarifications of the Ministry of Justice in February 2023, the current requirement concerns the date of certification of a copy of the UBO passport, and not the date of its legalization or certification of the translation into Ukrainian, which specifically concerns beneficiaries who are non-residents. What is also new is that the state register now should contain information about all citizenships of the UBO, if the last has several of them.

The law expanded the list of entities that may not disclose information about beneficiaries

Such entities are, in particular, political parties, trade unions, creative unions, employers' organizations, bar associations and offices, organizations that carry out professional self-government in the field of notary, state bodies, local governments, their associations, public companies, state and communal enterprises, chambers of commerce and industry, state pension funds, housing and construction cooperatives, dacha (dacha-building) cooperatives, horticultural and garage cooperatives (garage-building) cooperatives (societies), associations of co-owners of an apartment building, etc.

The liability for non-compliance with the rules of disclosure of information about beneficiaries is increased

In general, it is possible to divide the types of statutory liability for non-compliance with the rules of UBO disclosure by the subjects, namely:

• liability of a legal entity - for failure to submit, late submission, or submission of knowingly false information about the beneficiary or his absence, the law provides a fine of 1000 - 20 000 of a tax-free minimum income of citizens (as of 2023 it is 17 000 -- 340 000 UAH).

At the same time, those legal entities that sent a request to their founders to provide up-to-date information about the beneficiaries, but did not receive a response to such a request, are exempt from the provided liability. The founders of legal entities that have received a request to update the information on beneficiaries are obliged to respond to such a request within 5 working days from the date of its receipt. Within the same period, the founders are obliged to notify the legal entity of any changes in information about the UBO or changes in the ownership structure;

• liability of the founders of a legal entity that are residents of Ukraine -- for failure to submit a response to the request of a legal entity with the requirement to provide information on the beneficiary owner, a fine of 1000 - 20 000 of a tax-free minimum income of citizens (as of 2023 it is 17 000 -- 340 000 UAH) is provided by the law.

• liability of the director of a legal entity -- for failure to submit or late submission of information about the UBO, administrative liability of the director is provided in accordance with the Code of Ukraine on Administrative Offenses in the form of a fine of 1000 -- 3000 of a tax-free minimum income of citizens (as of 2023 17 000 -- 51 000 UAH).

At the same time, according to the Law of Ukraine "On Protection of the Interests of Reporting Entities and Other Documents during the Period of Martial Law or the State of War", which entered into force in March 2022, the application of administrative responsibility during martial law and 3 months from the date of its end will not be carried out. If it is clear with the administrative fine for the director provided by the Code of Ukraine on Administrative Offences, then whether the liability provided by the relevant laws (we are talking about fines of 17 000 -- 340 000 UAH, which is mentioned above in the article) will be applied is not clear yet. Therefore, we are waiting for additional clarifications from the Ministry of Justice on this issue.

Finally, the most interesting thing is in what time frame it is necessary to disclose information about beneficiaries under the new rules

The final and transitional provisions of the Law of Ukraine "On Prevention and Counteraction to Legalization (Laundering) of Proceeds from Crime, Terrorist Financing and Financing of Proliferation of Weapons of Mass Destruction" define the period for notification of beneficiaries under the new rules, namely legal entities registered before the entry into force of regulations that approve the methodology for disclosing information about beneficiaries, as well as provisions on the content and structure of ownership (except for entities, which have already disclosed the ownership structure earlier and those who are exempted from the obligation to disclose beneficiaries) submit documents regarding the UBO during:

• 6 months from the date of approval of the normative act on the methodology of disclosure of information on UBO and provisions on the content and structure of ownership, but not earlier than 90 days from the date of the end of martial law.

The rule mentioned above applies to those legal entities that have not yet submitted information about the UBO and ownership structure to the state registrar earlier.

The legal entities that have already disclosed information about the UBO and submitted the ownership structure for registration, but found inaccuracies in the previously submitted information in connection with the approval of the regulatory document, which will approve the methodology for disclosing information about the UBO, must re-submit the updated information within 6 months from the date of entry into force of this regulatory document. As of today, the mentioned regulatory document, which approves the methodology for determining the ownership structure, has not yet been published.

At the same time, we emphasize that in case of changes in information about the UBO or changes in the ownership structure, the rules on notifying the registrar within 30 days, which are described above in the article, apply.