The Swedish Parliament has passed a new law concerning registration of beneficial owners (Sw. Lag (2017:631) om registrering av verkliga huvudmän), an implementation of the Fourth Anti-Money Laundering Directive, which will enter into force on 1 August 2017. The purpose of the law is to increase the transparency regarding the ownership and the control of companies, associations and other legal entities in order to prevent money laundering and terrorist financing. The law prescribes, in essence, that legal entities are obligated to notify the Swedish Companies Registration Office who their beneficial owners are.
Who will have to register beneficial ownership?
The obligation to register beneficial ownership comprises Swedish legal entities, foreign legal entities operating in Sweden and natural persons with domicile in Sweden who administer trusts or similar legal constructions. Exempted from the obligation are the government, county councils and municipalities as well as legal entities over which these have a significant control, limited companies with voting shares admitted to trading on a regulated market within the EEA or a equivalent market outside the EEA, as well as estates of deceased and bankrupt persons.
Who is a beneficial owner?
A beneficial owner is a natural person who, alone or together with someone else, ultimately owns or controls a legal entity, or a natural person who benefits from someone who is acting on his or her behalf.
In certain cases, a natural person is assumed under the law to exercise ultimate control of a legal entity. Examples are when the person due to his or her shareholding or membership controls more than 25 per cent of the total number of votes in the legal entity, when the person has the right to appoint or resign more than half of the legal entity's board members or corresponding management or when a person is able to exercise equivalent control through agreements with the owners, members or the legal entity, or through the provisions in the articles of association, through shareholder agreements or similar documents.
What obligations will be imposed on the legal entity?
The new and most significant obligations for legal entities are that they must obtain reliable information on who their beneficial owners are and the nature and extent of the beneficial owner's interest in the legal entity which must be submitted to the Swedish Companies Registration Office.
If the information on beneficial ownership is missing or if reliable information cannot be obtained, the legal entity must nonetheless provide information about the lack of information. The legal entity must, at the request of an authority, provide without delay information about its beneficial owners and documentation on the investigation made to assess the beneficial ownership. The legal entity must also notify the Companies Registration Office without delay of any change in beneficial ownership.
When must the notification be submitted?
Pre-existing legal entities must submit their first notification within six months after the date the law entered into force, i.e., no later than 1 February 2018. Legal entities founded after 1 August 2017 will have four weeks to submit the notification of beneficial ownership. A legal entity must notify the Swedish Companies Registration Office as soon as the legal entity becomes aware of a new beneficial owner. As a practical matter this has been interpreted to mean within a few days of the company becoming aware of a new beneficial owner.
What happens if the notification is not submitted?
If the notification is incomplete, not submitted or contains incorrect information, the Swedish Companies Registration Office may impose a conditional fine on the legal entity, the managing director, a board member or other equivalent executives to submit a notification. The same applies to a refusal of disclosure to an authority. If the injunction is not complied with, the Swedish Companies Registration Office may impose the fine. Thereafter, the Swedish Companies Registration Office may impose a new increased conditional fine.