Ultimate Beneficial Owner (UBO) Investigation
- 2 minute read
- Legal & Corporate Law
Ultimate Beneficial Owner or UBO (Reel Ejer) is a term used to refer to the physical person(s) who actually owns or controls a business through direct or indirect ownership of a sufficient amount of shares or voting rights, which will typically be 25%, or who in other ways has control.
Ultimate Beneficial Owners in Danish Legislation
In January 2020 new rules regarding identification and documentation of Ultimate Beneficial Owners (“UBO”) of Danish Companies entered into force as part of the implementation of the 5th Money Laundering Directive.
This resulted in an update of the Danish Companies Act, which now includes a section regarding UBOs. The Act now states that;
“Companies shall collect information about the companies’ ultimate beneficial owners, including information about the ultimate beneficial owners’ rights.”
It has further become a requirement that the information regarding the UBOs need to be registered with the Danish Business Authority.
The Annual UBO Investigation
A section that is sometimes forgotten is the section about the annual UBO investigation.
The section states that the company is required to check if there are any changes to the registered information of the UBOs. And this investigation must be presented at the meeting where the central governing body approves the company’s annual report.
Companies are obligated to carry out the necessary investigations to establish who actually owns or controls the company. The company must make all reasonable attempts to identify the beneficial owners.
Basically, this means that the company must do all within its power to identify the UBOs until or unless it is deemed unreasonable and inappropriate to take further action. It is not deemed unreasonable and inappropriate if a UBO does not wish to identify itself as a UBO towards the company, as the company then needs to collect the information in other ways.
The UBO investigation can result in the following 3 scenarios:
1) The company has Ultimate Beneficial Owners.
2) The company doesn’t have Ultimate Beneficial Owners.
3) The company can’t identify its Ultimate Beneficial Owners.
The company is obligated to exhaust all possibilities to identify the UBOs of the company, as it is assumed that there are always identifiable UBOS.
If it is not possible to collect the information, the company must document how they tried to collect the information and why they can’t do anything further.
The UBO investigation: How-to
Step 1 in identifying the UBO(s) is to map out the ownership structure – direct and indirect.
In doing so, the company must identify any UBO(s) by both ownership and controlling rights.
This would include investigating whether there are any special circumstances that apply. This could be whether there are any:
Shareholder agreements Provisions of the articles of association Use of nominee schemes
The company must save each identification attempt including documentation for 5 years.
Step 2 is to determine whether anyone has control of the company through other measures.
This could be a person who has special rights stated in e.g. the ownership agreement or pledge agreement. And this person might not even have shares or voting rights.
Select board members Approve annual reports and dividend schemes Veto rights
Storing UBO Documentation and potential sanctions
The company must save each of the annual UBO identification attempts with documentation for 5 years.
There are rather serious consequences to not meeting the UBO investigation requirements that involve sanctions:
If the company does not register its UBOs the company can receive fines. If the company does not store the investigations made, the company can enter into forced dissolution.
At mighty admins, we can assist you with: UBO investigations and registrations Compliance services Maintaining statutory registers etc.
