Amendments to legislation regarding ultimate beneficial owners of legal entities and their ownership structures

The Methodology for Determining the UBOs of a Legal Entitywas introduced

On October 3, 2023, the Methodology for Determining the UBOs of a Legal Entity came into force, the main purpose of which is to establish a unified approach in Ukraine to determining the UBOs.

Key aspects:

• explains the sequence of actions to determine the UBOs, which includes a number of stages, in particular, the study of the signs, nature and degree of direct and indirect decisive influence of certain persons on the activities of a legal entity, generalization, analysis, systematization and documentation of such information;
• generalizes methods and approaches to researching information on the exercise of decisive influence. As a general rule, they are determined on a case-by-case basis, taking into account the nature and scope of the legal entity's activities, without a standard process;
• provides examples of sources that may contain information on the exercise of decisive influence;
• provides a list of signs that indicate the presence of indirect decisive influence, as well as signs that allow to exclude decisive influence;
• describes approaches to monitoring and updating information on the UBOs. It provides for the possibility for a legal entity to develop such approaches independently, for example, in internal documents;
• the peculiarities of determining the UBOs of non-profit organizations, corporate investment funds and legal entities with mutual investment funds in their structure, partnerships with partnerships in their structure, general and limited partnerships in their structure are highlighted.

Source:The Methodology for Determining the UBOs of a Legal Entity, approved by the Resolution of the Cabinet of Ministers of Ukraine and the National Bank of Ukraine No. 1011 dated 19.09.2023. 
   

The procedure for verification of information on the UBOs of legal entities and their ownership structure has been clarified

The Procedure for verification of information provided by a legal entity in explanations and documents to confirm information about its UBOs or ownership structure entered into force on November 06, 2023.

Key aspects:

• it is determined that in case of discrepancies or mistakes in the information on the legal entity's UBOs or in the structure of its ownership in the Unified State Register, the Ministry of Justice of Ukraine shall make a mark, which instructs the state registrar to make a mark in the Unified State Register of the possible unreliability of such information and conduct an inspection;
• establishes the obligation of a legal entity to provide explanations at the request of the state registrar, documents to confirm certain facts, and allow access to its premises;
• provides that, based on the results of the inspection, the Ministry of Justice of Ukraine may amend the information on the UBOs or ownership structure of a legal entity (if necessary) and remove the mark of inaccuracy entered in the Unified State Register. Ignoring the requirements of the state registrar or submitting outdated information on the UBOs or ownership structure may result in penalties.

In addition, we note that on December 01, 2023, a procedure will come into force that will establish the obligation of primary financial monitoring entities (banks, auditors, accountants, etc.) to notify the Ministry of Justice of Ukraine of discrepancies or mistakes in the information about the UBOs of a legal entity or its ownership structure with the information specified in the Unified State Register.

Source: The Procedure for verification of information provided by a legal entity in explanations and documents to confirm information about its UBOs or ownership structure, approved by the Order of the Ministry of Justice of Ukraine dated 14.09.2023 No. 3265/5, The Procedure for notifying the Ministry of Justice of Ukraine of discrepancies between the information received by the subject of initial financial monitoring based on the results of due diligence and information on the UBOs and/or ownership structure of a legal entity contained in the Unified State Register, approved by Order of the Ministry of Justice of Ukraine No. 2542/5 of 12.07.2023. 
    

The Procedure for bringing to liability for violation of the legislation on theUBOs disclosure has been launched

Starting from 07.11.2023, the Procedure for bringing legal entities, their founders (shareholders) to liability for violation of the legislation on the UBOs disclosure is in force.  

Key aspects:

• provides that the procedure for bringing to liability for violation of the legislation on disclosure of information on the UBOs is carried out by the Ministry of Justice of Ukraine in the form of written or oral proceedings, which may last up to two months;
• provides that within such proceedings, legal entities and their founders (shareholders) have the right to submit petitions and evidence, use legal assistance and exercise other rights to protect their interests;
• provides that the outcome of the proceedings is a decision (resolution) of the Ministry of Justice of Ukraine, which may be appealed in court.

As a reminder, failure to submit or late submission of information on the UBOs or their absence may result in fines for legal entities and their founders or shareholders (up to UAH 340,000) and for directors of legal entities (up to UAH 51,000). Payment of such fines does not relieve the obligation to provide accurate information about the UBOs or their absence.

Source: The Procedure for bringing legal entities, their founders(shareholders) to liability for violation of the legislation on the UBOs disclosure, approved by the Order of the Ministry of Justice of Ukraine No. 3258/5 dated 13.09.2023.