The Beneficial Ownership Register in Cyprus: Everything you need to know.

The Beneficial Ownership Register in Cyprus: Everything you need to know.

Copyright 2021 Christiana Aristidou LLC

Authored by: Rodoula Savva

The legal framework

On 20 May 2015, the European Council issued Directive (EU) 2015/849 (the “4th Anti-Money Laundering Directive”). The 4th Anti-Money Laundering Directive requires Member States to keep a central register of the beneficial or true owners of firms within their respective jurisdictions. Likewise, for trusts and other legal arrangements. In 2018 the European Council issued the Directive (EU) 2018/843 (the “5th  Anti-money laundering Directive”), which amended the 4th  Anti-Money laundering Directive. Under the revised provisions, EU Member States were required to launch publicly accessible registers of beneficial ownership of companies. The 5th Anti-Money Laundering EU Directive was transposed into Cyprus Legislation through the Prevention and Suppression of Money Laundering Activities Laws of 2007-2021 (the “Law”) on 23 February 2021. According to the Law, companies and any other legal entities incorporated in the Republic of Cyprus must obtain and hold adequate, accurate, and current information on their beneficial ownership, including details of the beneficial interests held. The Law provides for the establishment of a central beneficial owners register for companies or other legal entities (“Entities” or “Entity”). The BO register is a centralized register that contains information about the beneficial owners of Entities that fall under the Law.

Definition of Beneficial Owner

According to the Law, Beneficial Owner (hereinafter referred to as the “BO”) means any natural person(s) who ultimately owns or controls the customer and/or the natural person(s) on whose behalf a transaction or activity is being conducted and includes at least:

(a) in the case of corporate entities:

(i) the natural person(s) who ultimately owns or controls a legal entity through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interest in that entity, including through bearer shareholdings, or through control via other means, other than a company listed on a regulated market that is subject to disclosure requirements consistent with Union law or subject to equivalent international standards which ensure adequate transparency of ownership information. A shareholding of 25 % plus one share or an ownership interest of more than 25 % in the customer held by a natural person shall be an indication of direct ownership. A shareholding of 25 % plus one share or an ownership interest of more than 25 % in the customer held by a corporate entity, which is under the control of a natural person(s), or by multiple corporate entities, which are under the control of the same natural person(s), shall be an indication of indirect ownership. This applies without prejudice to the right of Member States to decide that a lower percentage may be an indication of ownership or control. Control through other means may be determined, inter alia, in accordance with the criteria in Version 1.3 Page 6 Article 22(1) to (5) of Directive 2013/34/EU of the European Parliament and of the Council (3);

(ii) if, after having exhausted all possible means and provided there are no grounds for suspicion, no person under point (i) is identified, or if there is any doubt that the person(s) identified are the beneficial owner(s), the natural person(s) who hold the position of senior managing official(s), the obliged entities shall keep records of the actions taken in order to identify the beneficial ownership under point (i) and this point;

(b) in the case of trusts: (i) the settlor; (ii) the trustee(s); (iii) the protector, if any; (iv) the beneficiaries, or where the individuals benefiting from the legal arrangement or entity have yet to be determined, the class of persons in whose main interest the legal arrangement or entity is set up or operates; (v) any other natural person exercising ultimate control over the trust by means of direct or indirect ownership or by other means; (c) in the case of legal entities such as foundations, and legal arrangements similar to trusts, the natural person(s) holding equivalent or similar positions to those referred to in point (b).

Control via other means may include shareholder’s agreement, the exercise of dominant influence, influence through family links 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.

The BO register

The Registar of Companies has issued a guidance note/manual, which provides information aiming to assist the users in filing the relevant BO information onto the interim system solution that has been developed to facilitate the collection of data for the BO register. The final solution will be established after the conclusion of the interim solution and collection of all BO information. Cyprus Entities, are obliged to identify and record electronically on the BO register, all relevant information of the beneficial owner/s who own or control them. This is also applicable to companies that provide administrative (including nominee shareholder) services to their clients. Entities are also obliged to always keep the BO register updated.

According to the Directive regarding the Central Register of Beneficial Owners of Companies and Other Legal Entities (the “Directive”) issued by the Registrar of Companies (the “Registrar”), the Registrar maintains and publishes exclusively in electronic form the information regarding the BO register. Filing of beneficial ownership details with the BO register will be performed by entering the required information for each beneficial owner through an online portal. There are no paper forms to be submitted or any Registrar filing costs. Entities considered are:

  • Companies incorporated or registered under the Companies Law Cap.113
  • European Public limited liability Companies
  • Partnerships.

The Directive does not apply to the following entities:

  • Companies listed on a regulated market that is subject to disclosure requirements consistent with Union law
  • Companies whose directors submitted 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 enacted before the commencement of the Directive (12 March 2021).
  • Overseas companies (branches)

All entities whose strike off or liquidation has been enacted after 12 March 2021 should complete the details of their BO, on the BO Register.

Information to be filed

The information to be filed on the BO register for each natural person beneficial owner is the following:

  • Name, surname, date of birth, nationality, and residential address
  • Nature and extent of the 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 (See Annex II and Annex III)
  • Identification document number indicating the type of document and the country of document issuance (Identity card or passport)
  • Date on which the natural person was entered in the register as beneficial owner
  • Date on there were changes in the particulars of the natural person or the date on which the natural person ceased to be a beneficial owner

For the time being, in cases where the shareholding structure of a Cyprus Entity registered in the Republic, leads to Trust/s, Foundation/s, Other similar legal arrangements or listed companies as beneficial owner(s), the information to be submitted in the BO register is the following:

  • Name
  • Registration number (if any)
  • Country of Jurisdiction
  • Business address (not applicable to trust)
  • Nature and extent of the 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
  • Date on which the Trust, Foundation, Other similar legal arrangements and listed company was entered in the register as beneficial owner
  • Date on which there were changes in the particulars of a Trust, Foundation, Other similar legal arrangements, and listed company or the date on which it ceased to be a beneficial owner for BO register purposes In the event where no natural person is identified as the beneficial owner based on the ownership rights or when there is doubt that the person identified is the beneficial owner, the details of the senior management official must be submitted, indicating whether the person is a director in the company or whether it holds another position, by declaring that position. In this case, the nature and extent of the beneficial interest is not submitted on the system.

The responsibility for the submission of information lies with the Entity and its officials.

Timing of filings

The Department of the Registrar of Companies announced that the starting date for data collection for companies is 16 March 2021.

From this date, companies will be granted a period until 12 March 2022 for recording in the system that has been developed, the information concerning their real beneficiaries.

In case of a change in the information of a BO, an entity and its officers must, within fourteen (14) days from the change, file onto the BO register the information regarding the new BO or the change on the details of an existing BO.

Entities registered following the 16th March 2021 (new entities), must, no later than thirty (30) days from the date of their registration, file electronically to the BO Registry, all information in respect of each of their beneficial owner.

During the period from 1st to 31st December of each calendar year, an Entity must confirm electronically, to the Registrar its beneficial owners. It is noted, that this requirement cannot be implemented via the interim solution. It will be implemented with the final system solution to be developed and entities will be informed accordingly by the Registrar.

It is emphasized that the system that has been developed is an intermediary solution and access to it will only be granted to competent authorities, upon relevant request to the Registrar of Companies.

The information collected will be transferred to the final system solution once developed and access to it will be based on the provisions of the 5th European Directive (EU 2018/843) of the European Parliament and of the Council of 30 May 2018, concerning the prevention of money laundering and terrorist financing. It is noted that once developed, it will be open to the general public, obliged entities, and competent authorities.

Access to information submitted to the BO register (partly applicable to the interim solution)

The BO register will become publicly available according to the provisions of the legislation. The following persons shall, in any case, have access to the information concerning the beneficial owner(s) through the electronic BO register:

  • Competent Supervisory Authorities, the FIU (The Unit for Combating Money Laundering (MOKAS) is the Financial Intelligence Unit (FIU) of Cyprus), the Customs Department, the Tax Department, and the Police have fast and unlimited access without the submission of a fee or notifying the Entity;
  • Obliged entities, in the context of conducting due diligence and identification measures for the client as defined in the Law have access to the name, month and year of birth, nationality, and country of residence of the BO as well as to the nature and extent of the beneficial interest held, following payment of three euros and fifty cents (€3.50) fee, per Entity
  • All members of the general public have access to the name, month and year of birth, nationality, and country of residence of the beneficial owner, as well as the nature and extent of the beneficial interest held, following payment of three euros and fifty cents (€3,50) fee, per Entity.

It is noted, that for the interim solution access to the BO information will be granted ONLY to Competent Supervisory Authorities, the FIUs, the Customs Department, the Tax Department, and the Police, without any restriction and upon submitting a written request to the Registrar of Companies. This means that for the interim solution the search facility will not be available to obliged entities and any member of the general public. Competent Supervisory Authorities, the FIU, the Customs Department, the Tax Department, and the Police have unrestricted access to the BO information.

Penalties (not applicable to the interim solution)

The responsibility for the true and accurate submission of the BO information lies with the Entity itself and any of its officers. It is highlighted that fines and penalties may be imposed to Entities and their officers that do not comply with the Registrar’s Directives and the provisions of the AML Law regarding the disclosure of all requested BO data to the BO register. It must be noted that during the interim solution no penalties will be imposed (i.e. one year from the date of the BO register’s launch, 12 March 2021 – 12 March 2022).

We will be at your disposal to discuss anything concerning the above.  If you are interested in engaging us to proceed and provide our services concerning the BO registry, please kindly get in touch with us at rodoula@christianaaristidou.com  Thank you very much.