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In the wave of global anti-money laundering and financial transparency measures initiated with the FCPA and the Anti-Bribery Act in the US and the UK, to name a few, the ordinance n° 2016-1635 dated December 1^st, 2016 introduced a new obligation for commercial companies and legal entities incorporated in France (with the exception of public companies) which are now required to obtain and maintain accurate and up-to-date information on the identity of their ultimate beneficial owner(s); i.e., the natural person(s) who ultimately control the company, whether directly or indirectly.

 French law defines the “beneficial owner” as the natural person or persons who either hold, directly or indirectly, more than 25% of the capital or of the voting rights of a given company, or who exercise, by any other means, a power of control over the management, administrative or governing bodies of that company or over the shareholders’ meeting.

As for UCITS, the beneficial owner shall mean the natural person or persons who either hold, directly or indirectly, more than 25% of the capital of said UCITS, or who exercise, by any other means, a power of control over the administrative or governing bodies of the UCITS or, where appropriate, of the management company or portfolio company that represents it.

It appears that the notion of “control” over said bodies remains somewhat imprecise and could give rise to implementation issues. The publication of a decree is however expected in the following weeks in order to clarify this notion.

In the meantime, the procedure and information that the legal representative of a company must follow are described in the decree n° 2017-1094 dated June 12^th, 2017.

From now on, the legal representative of a commercial company incorporated as from August 1^st, 2017 must include in its application for registration an additional document revealing the identity of the company’s beneficial owner(s).

Companies registered before August 1^st, 2017 shall have until April 1^st, 2018 to comply with this new provision.

Such information is nevertheless intended to be privileged and shall only be disclosed to a restricted list of persons or entities.

Yet, failure to comply with this new provision entails criminal sanctions (up to 6 months in jail and a maximum fine of €7,500) as well as additional civil sanctions for the legal representative. Moreover, an injunction procedure is laid down in order to challenge companies that do not comply with their reporting obligations.

As this recent requirement leaves very little time to adapt, it is paramount to anticipate this new reporting formality and for companies to disclose the identity of their ultimate beneficial owner(s).

 

Jean-Nicolas Soret, Partner

Vincent Guilaine,  Associate