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Coping with Covid-19 - the Business Response

Do not overlook registering your UBO!

By Cezary Żelaźnicki, managing partner at PwC Legal Pawłowski, Żelaźnicki sp.k.
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EU member states have been obliged by the Fourth Anti-Money-Laundering Directive to introduce registers of ultimate beneficial owners (UBO), disclosing information on the individuals ultimately owning or controlling selected businesses. One of the purposes has been to prevent money laundering and terrorist financing through a system of accurate data collection of UBOs, preventing perpetrators from hiding their identity in complex corporate structures.

Central register of ultimate beneficiaries

To this end, the Poland’s central register of ultimate beneficiaries (Centralny Rejestr Beneficjentów Rzeczywistych, CRBR) came into existence on 13 October 2019. Almost all Polish commercial companies and partnerships are obliged to identify their UBOs and disclose them in the CRBR. Only professional partnerships and public joint-stock companies are exempted from this obligation (however, their subsidiaries are still subject to registration). Additionally, the registration requirement does not apply to other forms of business activity not conducted in a form of commercial company or partnership, such as sole proprietorships, civil law partnerships, investment funds (unless they operate as commercial companies) or branches of foreign businesses.

The list of entities subject to registration is expected to be extended in the future. In particular, there is already a draft bill in place providing for mandatory registration for foundations and trusts where the trustees are Polish residents.

Making a submission

For entities already registered in the national court register (Krajowy Rejestr Sądowy, KRS) before 13 October 2019, the deadline for their first registration in the CRBR has been recently postponed to 13 July 2020. Entities registered in the KRS on or after 13 October 2019, have seven days for their first registration in the CRBR starting from the day of their registration in the KRS. Additionally, a seven-day period also applies to the obligation to update the CRBR in cases where information previously disclosed in it has changed. However, the seven-day periods have been temporarily suspended for the duration of the state of pandemic, giving more time for such registrations.

Submissions to the CRBR are free of charge and have to be made electronically through the dedicated governmental website. Additionally, submissions have to be signed in accordance with a given entity’s rules of representation, so it will be necessary to obtain several signatures in case of a joint representation. Lastly, signing can be done only using a trusted ePUAP profile or a qualified electronic signature, so it will be necessary to obtain one if it has not already been done by a given entity’s representatives.

Diligent UBO identification

Identifying a UBO may be a tricky task. In general, ‘UBO’ is defined as an individual or individuals who directly or indirectly control an entity and have a decisive impact on its actions or on whose behalf business relationships are being conducted. Additionally, the Polish Anti-Money-Laundering Act provides several explicit prerequisites for considering an individual as an UBO, such as 25% shareholding threshold or special rights to manage the entity’s financial and operating policy. All these must be diligently verified, taking into consideration the overall circumstances related to the company, including the existence of any pledges or other third-party rights. To make things harder, the rules for identifying the UBO may differ between EU member states, so identification must take into account the specifics of the Polish Anti-Money-Laundering Act. As a result, it cannot be excluded that the UBO of the Polish subsidiary may be different from the UBO of its foreign dominant entity.

Since the legal consequences of reporting untrue or inaccurate data are severe and some of the criteria for UBOs identification are evaluative, companies should perform a thorough verification of their UBOs prior to their registration in the CRBR. Reporting untrue or inaccurate data to the CRBR is subject to criminal liability and the entity’s representatives responsible for such disclosure are liable for damage caused by reporting of such data, as well as for failure to report UBO within the statutory deadline. Additionally, in case of failure to register the UBO within the statutory deadline, the company itself may be subject to a penalty of up to one million zlotys.

Although registration in the CRBR may seem fairly uncomplicated, companies subject to such registration should undertake certain actions to make sure they comply with the new obligations. Starting from a diligent identification process, through to making sure they are able to validly sign the submission, the entire registration should be planned in advance to avoid any delays or inaccuracies, as the consequences for such noncompliance can be severe for the entity and its representatives.

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