Legal aspects of determining the ultimate beneficial owner: clarifications and recommendations

At the end of 2022, 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" (hereinafter - Law 2571) came into force, which aims to improve mechanisms for obtaining and identifying reliable information about the ultimate beneficial owners (UBOs) and ownership structures of legal entities, as well as preventing and counteracting the legalization (laundering) of proceeds of crime, terrorist financing and the financing of arms proliferation.

The Law amended the provisions of the Law of Ukraine "On State Registration of Legal Entities, Individual Entrepreneurs and Public Organizations" and the Law of Ukraine "On Prevention and Counteraction to Legalization (Laundering) of Proceeds of Crime, Terrorist Financing and Financing of Weapons of Mass Destruction Proliferation" in order to

• simplifying the procedure for submitting information on the ultimate beneficial owner and ownership structure by legal entities when entering information into the Unified State Register;
• to regulate the mechanism for verifying the accuracy of information on the ultimate beneficial owner and ownership structure of the company;
• strengthening the liability for failure to submit or inaccurate submission of information on the ultimate beneficial owner and ownership structure by a legal entity.

Submission and updating of information in the Unified State Register on ultimate beneficial owners and ownership structure arises in the following circumstances

• in case of registration of a legal entity;
• in case of change of the ultimate beneficial owner. In this case, the information on the ultimate beneficial owner must be submitted to the state registrar within thirty (30) business days from the date of its actual change.

If a legal entity was registered long ago (before the requirements for submitting information on the ultimate beneficial owner were established), it must submit information on the ultimate beneficial owner no later than 90 days after the termination of martial law.

The Regulation on the form and content of the ownership structure was approved on March 19, 2021 by an order of the Ministry of Finance of Ukraine.

Also, on September 19, 2023, the Cabinet of Ministers and the NBU approved the Methodology for Determining a Legal Entity as a BOC by joint Resolution No. 1011.

The Methodology contains a separate section on the specifics of determining the ultimate beneficial owner of a non-profit organization - a legal entity.

The key goal of the Methodology is to introduce a unified understanding for determining the ultimate beneficial ownership of legal entities, establish common forms and ways of researching information, analyzing factual data to determine the signs of direct and indirect decisive influence.

The Law of Ukraine "On State Registration of Legal Entities, Individual Entrepreneurs and Public Organizations" regulates the procedure for submitting information on the BEC and the requirements for it.

As for public entities, within the meaning of this law, only public organizations are required to submit information about their ultimate beneficial owner.

Samples of drawing up a schematic representation of the ownership structure, including directly for public organizations, are published on the official website of the Ministry of Finance of Ukraine, at the following link https://surl.li/yyguxj

In addition, in order to ensure a unified approach to understanding the above-mentioned legal provisions by representatives of public associations, the Centre for Democracy and Rule of Law in cooperation with the Ministry of Justice of Ukraine has developed a guide that is intended to answer the most common questions in the field of determining the BSC.

The guide is available at the following link: https: //surl.li/gcjvwr