25. Jun 2018

The Law on Central Register of Ultimate Beneficial Owners entered into force on 8 June 2018 (The Official Gazette of The Republic of Serbia no. 41/2018) (hereinafter: The Law)

 

Having in mind that The Republic of Serbia has recently opened new chapters in the course of European Union accession negotiating process, it is necessary to conduct rapid harmonization of national legislation with the European regulations. To that purpose, the Comity Manival’s procedures and EU Directive no. 2015/849 have provided a deadline until September 2018 for the Republic of Serbia to prove that it has made significant progress related to the elimination of the shortcomings identified in the Committee’s report regarding the harmonization of national legislation with the European regulations in the field of prevention of the money laundering and financing of terrorism. International standards in this domain emphasize, first of all, a brief time interval in which Beneficial Owner data can be obtained and prescribe, with that regard, the existence of a public register in which all data would be unified.

 

Therefore, the primary objective of the enactment of the Law is establishment of the unique database which shall contain information about Beneficial Owners of the legal entities and other entities registered in the appropriate registers of the Republic of Serbia, in order to improve the existing system of detecting and preventing of money laundering and financing of terrorism.

 

The Law shall apply to the following legal entities and other entities registered in the Republic of Serbia (hereinafter collectively referred to as Registered Entities) (i) companies, apart from the public joint stock companies (ii) cooperatives (iii) branches of foreign companies (iv) associations, other than political parties, trade unions, sports organizations and associations, churches and religious communities (v) foundations and endowments (vi) institutions (vii) representative offices of foreign companies, associations, foundations and endowments.

 

For the purpose of the provisions of the Law the Beneficial Owner of the Registered Entity is:

 

1) natural person who is directly or indirectly the holder of 25 or more of the stake, shares, voting rights or other rights which represent the base of his/her participation in the management of the Registered Entity, i.e. he/she participates in the capital of the Registered Entity with 25% shares or more;

 

2) natural person who directly or indirectly has a prevailing influence on the business operations management and decisions making;

 

3) natural person who indirectly provides or secures funds for the Registered Entity and has thereby a significant impact on the decisions made by the managing body of the Registered Entity regarding the financing and business activities;

 

4) natural person who is a founder, trustee, protector, beneficiary if he/she is determined, as well as a person holding a dominant position in managing of a trust or another foreign law person;

 

5) natural person registered for representing the cooperatives, associations, foundations and institutions if the authorized representing person did not register another natural person as the Beneficial Owner.

 

With reference to the abovementioned, it shall be noted the Law stipulates that the natural person who has been registered as the legal representative, i.e. as a member of a legal entity’s body shall be considered as the Beneficial Owner of the Registered Entity in case it is not possible to determine, as prescribed by the Law, who is the Beneficial owner.

 

The Law itself prescribes the obligation of the existing Registered Entities to determine its Beneficial Owners (which includes obtaining and keeping appropriate documentation) within the 30 days from the date on which the Law has entered into force, i.e. no later than 8 July 2018, and this data and documents should become available at the request of the State body and the National Bank of Serbia.

 

Central Register as public, unique, central, electronic database of natural persons who are Beneficial Owners of Registered Entity is going to be led by The Serbian Business Registers Agency (hereinafter: APR) in electronic form. The APR shall establish the Central Evidence no later than 31 December 2018.

 

The data from Central Register shall be publicly available to all interested parties without proving any legal interest.

 

After the establishment of the Central Register, the authorized persons from the Registration Entities are obligated to enter and record in electronic evidence the data on Beneficial Owners and legal basis for the acquisition of such capacity not later than 31 January 2019.

 

Moreover, the Law prescribes the obligation to store data and documents on the Beneficial Owners of the Registered Entities, both for APR, which has to permanently store such data, as well as for the Registered Entities, which are obligated to keep information about the Beneficial Owners for 10 years from the date of registration.

 

In order to create preconditions for the actual use and respect of the provisions of the Law, a new criminal offense has been introduced for which imprisonment from three months to five years is prescribed, for persons who intend to conceal the real Beneficial Owner by (i) not entering the data of a Beneficial Owner of the Registered Entity (ii) enter the untrue information about the Beneficial owner (iii) change or delete the true information about the real Beneficial owner.

 

Also, misdemeanor responsibility is foreseen with fines ranging from 500.000,00 to 2.000.000,00 dinars for Registered Entities (i.e. ranging from 50.000,00 to 150.000,00 dinars for responsible persons) in case of a failure to execute the recording or updating the data on the Beneficial Owners in the Central register or in case when the Registered Entity does not have the appropriate documentation containing accurate and up to date information about Beneficial Owners.

 

The Legislator predicted that bylaws for the implementation of this Law shall be adopted within three months from the date of its entering into force. Particularly, it is about two Rulebooks by which the Minister in charge of economic affairs shall closely prescribe the content of the Central Register for the purpose of conducting the registration of the Beneficial Owners of the Registered Entities, as well as the manner and conditions for the electronic exchange of data between the APR, the State Authorities and the National Bank of Serbia, for the implementation of registration of the Beneficial Owners of Registered Entities.

 

Conclusion

 

By adopting of this Law, Serbia has shown a clear intention to finally stop the concealment of Beneficial Owners of domestic and foreign companies and thus the interference of the illegally acquired money into legal flows. Under the “pressure “of international institutions and the European Union, a decision was made, by the emergency procedure to establish a special registry, whereby the names of the Beneficial Owners of Registered Entities who directly or indirectly have more than 25% or more stocks, shares, voting rights or other rights, on the basis of which participate in the management of Registered Entities, are situated.

 

We consider that this Law will ensure more efficient operation and work of the competent state authorities and other bodies in exercising public authority regarding activities of detecting and preventing money laundering and financing of terrorism, and that a higher level of reliability will be achieved in the registered data on the Beneficial Owners.

 

By prescribing misdemeanor liability (high fines for a legal entity and a responsible person) and criminal liability (imprisonment sentence from three months to five years) for entering false data in the Central Register, as well as for failing to record all changes in beneficial ownership, the legislator showed an unequivocal intention to ensure the actual implementation and compliance with the provisions of the Law by Registered Entities.