Declaring the UBO is a legal obligation for legal entities under the Measures Against Money Laundering Act(MAMLA) in Bulgaria.
Definition of “Ultimate Beneficial Owner”
The legal definition of a UBO, as used in Article 63, paragraph 4, item 1 of MAMLA, is provided in §2 of MAMLA’s Supplementary Provisions. It aligns with the definition in Article 3, paragraph 6(a)(i) of EU Directive 2015/849. According to these texts, the UBO of a legal entity or another legal arrangement, whose identifying information must be entered in the Commercial Register, is the natural person or persons who ultimately own or control the entity.
For corporate legal entities, individuals who must be declared and entered as UBOs exclude those who exercise control through companies whose shares are traded on a regulated market. This is only applicable if the companies on the stock exchange are subject to disclosure requirements under European Union law or equivalent international standards, ensuring an adequate level of ownership transparency.
The introduction of this exception for public companies, defined as legal entities in Article 110, paragraph 1 of the Public Offering of Securities Act (POSA), is driven by:
- The dynamic nature of regulated financial markets, characterized by significant and constantly changing shareholder bases in terms of composition and volume.
- A stricter and specialized regulation on disclosing information about shareholders who acquire or transfer shares in public companies. This ensures sufficient transparency in financial transactions and ownership changes involving such companies (Articles 145-148e of the POSA and Articles 38-43 of the Financial Instruments Markets Act).
Exceptions for Public Companies and Declaring Control
The explicit exception introduced by the European and national legislator regarding public companies relieves entities directly or indirectly controlled by such companies from the obligation to declare a specific natural person (a shareholder in the public company) as the UBO in the Commercial Register (Field 550). Instead, it is sufficient and necessary for the entity to declare and register, under Article 63, paragraph 4 of MALMA, details about “Legal entities or other legal arrangements through which direct or indirect control is exercised.” The identification details of the public company must be provided to ensure sufficient transparency regarding the ownership of the capital.
Senior Management as UBO – A Misapplied Practice
This scenario differs from cases where a UBO is declared as the natural person performing the role of senior management. Such a declaration should only occur:
- After all possible means have been exhausted, and there is no reason to suspect that the person identified as the UBO is not the actual owner.
- If it is impossible to identify a UBO under normal circumstances.
A problematic practice in registry procedures is the declaration of senior management as UBO in cases involving chains of companies where the ultimate owner is a public company. This misuse contradicts the intent of MALMA.
Frequent Registry Challenges and Judicial Practice
In practice, the Commercial Register frequently issues refusals to register circumstances for entities controlled by companies whose shares are traded on regulated markets. Consequently, many appeals against such refusals are filed.
Insights from Judicial Practice
Judicial decisions consistently confirm that entities controlled by public companies traded on regulated markets are not required to declare a natural person as a UBO. However, this does not exempt them from the obligation to:
- Declare direct and indirect control.
- Designate a contact person for MAMLA purposes if the company’s registered representative does not reside permanently in Bulgaria.
To comply, entities must file a declaration under Article 63 of MAMLA and submit an application to the Commercial Register.
Key Documentation for Successful Registration
A critical aspect of successful registry procedures is the documentation submitted to support the declared circumstances. The declaration form provides examples of relevant documents, but one of the primary proofs of public company ownership is not explicitly highlighted. Depending on the regulated market where the shares are traded, the entity may provide appropriate documents. All documents bust be translated and legalized. Sometimes an apostille may be required. All this must be check prior the submission of the declaration.
It is essential to outline the entire corporate structure leading to the public company. For each foreign company in the ownership chain, a certificate or other document proving its existence and its relationship to the group must be provided.
