27/08/2019 Briefing

CENTRAL REGISTER OF BENEFICIAL OWNERSHIP NOW OPEN

Some weeks ago the Companies Registration Office had announced that the opening of the Central Register of Beneficial Ownership of Companies and Industrial and Provident Societies (“Central Register”) had been postponed temporarily, notwithstanding that it had been expected to accept filings from 22 June 2019. On the 29 July 2019 the Central Register was formally opened to accept beneficial ownership filings.

1. Background

In March 2019 the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019 (“2019 Regulations”) came into force in Ireland. The 2019 Regulations revoked the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2016 (“2016 Regulations”). The 2019 Regulations are intended to transpose Article 30 of the Fourth Money Laundering Directive, as amended, into Irish Law.

Under Part 3 of the 2019 Regulations, the Minister for Business, Enterprise and Innovation, in consultation with the Minister for Finance were required to appoint the RBO. This role will be performed by the Registrar of Companies, having been appointed the Registrar of Beneficial Ownership of Companies and Industrial and Provident Societies (“RBO”) with effect from 29 July 2019. The RBO shall maintain the Central Register.

Under the 2019 Regulations, relevant entities which were in existence before 22 June 2019 are required to deliver the following information to the RBO by 22 November 2019:

  • a) The name, date of birth, nationality and residential address of each of its beneficial owners;
  • b) Details of the nature and extent of the beneficial interest held, or control exercised by, each of its beneficial owners;
  • c) Its name and number as contained on the register maintained by the CRO under the Companies Act 2014, or with the Registry of Friendly Societies; and
  • d) The PPS number of each beneficial owner who has a PPS number.

All relevant entities formed post 22 June 2019 have five months from the date of incorporation to register their beneficial ownership details with the RBO.

The website for the Central Register was launched in April 2019 and is available at https://rbo.gov.ie. The website provides additional information as to how the Central Register will function.

2. Beneficial Owners who do not have PPS numbers

One of the more far-reaching changes introduced by the 2019 Regulations was the new requirement that each relevant entity must collect and store the PPS numbers of its beneficial owners, and that these PPS numbers are to be submitted to the Central Register. However, crucially, the 2019 Regulations only create such a requirement in respect of beneficial owners for whom “such a number has been issued”.

Where a beneficial owner does not have a PPS number, the Registrar has now advised that a Form BEN2 (Declaration as to Verification of Identity) will be required to verify that beneficial owner’s identity. Once the Form BEN2 has been processed by the Registrar, the beneficial owner will be allocated an RBO Transaction Number, and that number can be used in respect of future RBO filings that reference the beneficial owner in question.

The Form BEN2 looks for a beneficial owner to make a sworn declaration as to his/her name, date of birth, nationality and residential address. The RBO is advising that completed Form BEN2s can be uploaded via an online portal, although as of yet, this has yet to be implemented. It is an offence for a company or an industrial and provident society not to provide a PPS number for a beneficial owner who has one. Given that the 2019 Regulations do not require beneficial owners to provide relevant entities with a Form BEN2 and do not empower relevant entities to seek a completed Form BEN2 from beneficial owners, it is hard to see how a relevant entity (i.e. a company or industrial and provident society) could be prosecuted for not filing something which it is not within their powers of procurement to file.

Further, the RBO has outlined that only companies and industrial and provident societies will be required to file data with the Central Register. Regulation 20 clearly refers to this requirement extending to all “relevant entities”, referring to all corporate or other legal entities incorporated in Ireland. However, this definition clearly includes other bodies corporate incorporated in Ireland and it is unclear why the RBO will not be requiring that such entities file beneficial ownership information with the Central Register. Separate arrangements will, presumably, be put in place, likely by way of further regulations, for other types of corporate entities, including ICAVs.

3. How we can help you

Companies and industrial and provident societies that were in existence before 22 June 2019 must report their beneficial ownership information to the Registrar before 22 November 2019. All relevant entities formed post 22 June 2019 have five months from the date of incorporation to register their beneficial ownership details with the RBO. Additionally, relevant entities are still obliged to establish and maintain an internal beneficial ownership register, including the additional information required under the 2019 Regulations. The RBO is planning to write to each company and industrial and provident society in the near future in relation to reporting obligations.

If we have already assisted in the establishment of your internal Beneficial Ownership Register, we can update its format to make it compliant with the 2019 Regulations. We can also advise on how to obtain the new information required to be collected by relevant entities, and ultimately assist in presenting the required returns to the Central Register on your behalf.

EEA-RESIDENT DIRECTOR REQUIREMENT AND BREXIT

Every Irish company must have at least one director who is resident in a member state of the EEA (i.e. the EU, Iceland, Norway and Liechtenstein) as set out in section 137 of the Companies Act 2014 (the “Act”), unless it has taken alternative steps (as set out below).

Given the impending exit of the UK from the EU (and the EEA) with effect from 31 October 2019, any company whose only EEA-resident director is UK-resident may need to take steps to ensure continuing compliance with section 137. Such steps would need to be taken urgently should there be no transition period, for example in the context of a “no deal” Brexit.

1. Consequences of non-compliance

If a company does not have an EEA-resident director, and does not avail of one of the two exemptions, there are serious practical consequences. Firstly, the company, and any officer of the company who authorised or permitted the default, will be guilty of an offence and liable to a fine of up to €5,000.

Secondly, the default is grounds for the Companies Registration Office (the “CRO”) to commence the process to strike the company off the register and have it dissolved (section 725(1)(a) of the Act). Should the company be dissolved, all its property will be held by the Minister for Finance, and, insofar as many commercial contracts provide for automatic termination in the event of dissolution, the company will risk the termination of those contracts.

2. Residency Requirement

For the purpose of the above requirement (and as set out in section 141 of the Act), a person will be considered to be resident in Ireland at a particular time if:

  • a) They have been resident in Ireland for a period of 183 days, or for several periods (each exceeding 30 days) totalling 183 days, in the previous 12 months; or
  • b) They have been resident in Ireland for a period of 280 days, or for several periods (each exceeding 30 days) totalling 280 days, in the preceding 24 months; or
  • c) They have formally elected to be resident for tax purposes for that tax year (this will also require that they satisfy an officer of the Revenue Commissioners that they will also be resident in the following tax year).

The Act does not define what it means to be resident in any other EEA State, but one would expect that it would closely align to the definition for the purpose of Irish residency.

A company which currently relies on a UK director for the purpose of meeting the obligation to have an EEA-resident director could therefore look to appoint an additional director (resident in the EEA, but not the UK) so as to continue to meet this obligation. Such a director would need to have been appointed before the UK ceased to be part of the EEA.

3. Potential exemptions

There are two potential exemptions from the requirement to have an EEA-resident director.

Section 137 Bond

Firstly, a company will not be required to have an EEA-resident director where it holds a bond to the value of €25,000 for the purpose of discharging the company’s liability (should it fail to pay) in respect of the following fines and penalties:

a fine imposed on the company in respect of an offence under the Act committed by it, being an offence which is prosecutable by the Registrar of Companies;

a fine imposed on the company in respect of an offence under section 1078 of the Taxes Consolidation Act 1997; and

a penalty which it has been held liable to pay under section 1071 or 1073 of the Taxes Consolidation Act 1997.

The bond must have a minimum period of validity of two years, commencing no earlier than the occurrence of the event giving rise to the requirement for the bond (i.e. the date on which the company ceases to have an EEA-resident director) and that the surety under the bond must be a bank, building society, insurance company or credit institution. Currently, the cost of such a bond for a period of two years is just under €1,400 (excluding VAT); this does not include any legal fees for assisting with putting this in place.

Section 140 Certificate

Alternatively, the company may apply for a certificate from the CRO (under section 140 of the Act) to confirm that the company has a real and continuous link with one or more economic activities that are being carried on in Ireland.

In order to obtain such a certificate, a company must provide the CRO with a written statement from the Revenue Commissioners stating that the Revenue Commissioners have reasonable grounds to believe that the company has a real and continuous link with one or more economic activities being carried on in Ireland. The Revenue Commissioners require to be provided a copy of the company’s most recent financial statements, if they are to make such a statement.

Once the statement from the Revenue Commissioners has been obtained, the company must submit this together with a Form B67 to the CRO. The statement must not pre-date the application by more than two months. The exemption from the requirement under section 137 will apply from the date on which the section 140 Certificate is issued by the CRO.

For a period following the Brexit referendum result the Revenue Commissioners ceased accepting applications to provide a written statement for the purpose of section 140. Although the Revenue Commissioners are currently accepting such applications and issuing statements again, one could not rule out their returning to this previous position, which would in turn preclude companies from obtaining the CRO certificate.

This option will only be relevant for existing companies and not for newly-incorporated entities, in that it will not be possible for new companies to demonstrate a real and continuous link with one or more economic activities being carried on in Ireland.

4. Next Steps

Any company reliant on a UK-resident director to meet the requirement to have an EEA-resident director should consider putting in place a contingency plan for the possibility that the UK will exit the EU on 31 October 2019 (with or without a deal), whereby it would either appoint an EEA-resident (but non-UK resident) director, put in place a bond, or obtain a section 140 certificate. We can provide further advice to clients on the available options and on the practical steps that will apply in each case.