The Law aims at simplifying certain aspects of the disclosure process of ultimate beneficial owners (UBO) and the ownership structure of Ukrainian companies. At the same time, it increases liability for improper disclosure and introduces enhanced control and reporting mechanisms.
What the Law says
The Law envisages, among others, the following changes:
- UBO status to be clarified
- The Ministry of Finance should develop a methodology for determining a UBO of a Ukrainian company and it is expected to provide a clear set of criteria to be met by an individual to qualify for the UBO status.
- Simplification of registration process
- Legal entities are no longer obliged to confirm the UBO and ownership structure information annually. However, the Law retains the requirement to report any changes of information on the UBO and/or the ownership structure to the Unified State Register of Legal Entities, Individual Entrepreneurs and Public Organizations ("Register") within 30 business days upon such change.
- The Law stipulates the possibility of reporting changes in electronic form; however, the respective procedure is not described in detail.
- The Law abolishes a requirement to submit certain ancillary documents during the UBO registration process, as well as limits cases in which the information on the UBO and ownership structure has to be disclosed.
- Additional obligations for participants/UBOs of Ukrainian companies
- The company's participants should timely provide information on the UBO and the ownership structure changes at the request of a Ukrainian company and independently notify the company upon such changes.
- The copy of the UBO's passport, which has to be submitted to the state registrars for the UBO disclosure, has to be notarized no later than 90 days before the submission of documents to the Register. For the UBO who is a Ukrainian resident, the passport copy may be certified with a qualified electronic signature of the director of a Ukrainian company.
- Consequences and liability for improper UBO disclosure
- State authorities, notaries, banks, auditors, attorneys at law and other subjects of financial monitoring are now required to report to the Ministry of Justice of Ukraine ("Ministry") on the identified incomplete, inaccurate or incorrect information on the UBO and ownership structure of the company. Such reporting will not be treated as a breach of secrecy, and failure to report an identified inaccuracy may result in the imposition of a fine on the subjects of financial monitoring.
- Based on the report of the subjects of financial monitoring, the Ministry may order a state registrar to make an entry on the potential inaccuracy of the company's UBO information in the Register. A state registrar may also request from the company confirmatory documents and clarifications to verify identified inaccuracy.
- If the registrar confirms that the UBO information is inaccurate, the registrar may remove such incorrect UBO information from the Register.
- The companies whose UBO information was confirmed to be inaccurate and removed from the Register, would be treated as high-risk entities. Determination of a company as a high-risk entity may trigger more complex financial monitoring procedures for such company.
- Failure to comply with the disclosure obligations may result in fines for the company of UAH 17,000-340,000 (approximately USD 465-9,300).
Actions to consider
The requirement to disclose information on the UBO and the ownership structure does not apply during martial law.
We recommend that the management of Ukrainian companies, their participants/shareholders and UBOs consider the following actions:
- Keep track of the accuracy of information on the UBO and the ownership structure disclosed with the Register.
- Monitor the adoption of the methodology for determining a UBO and, once published, check if the UBO and ownership structure information (if already disclosed) is in line with the new rules.
- Urgently bring the UBO and ownership structure information in line with the new rules if any inconsistencies are identified.