Concerning the frequent misinterpretations of the definition for Beneficial Owner under § 2 of the additional provisions of the Law on Measures against Money Laundering (“LMML”) in connection with the obligation to declare a Beneficial Owner in accordance with Article 63, paragraphs 1 and 4 of the LMML, it should be made clear that there is no obligation to declare a beneficial owner of a company with an ultimate parent company that is a public company.
Our practice shows that misinterpretation is dictated by paragraph 5 of § 2 of the additional provisions of the LMML, which states that when a Beneficial Owner can not be established, the natural person who holds the position of a senior manager is considered a “Beneficial Owner”. It is the interpretation of this provision that leads to the decisions to declare a senior manager as a Beneficial Owner by companies having a public company as an ultimate parent company.
Our Arguments:
It should be noted that paragraph 5 of § 2 of the additional provisions of the LMML refers to paragraph 1 of the same §, which paragraph specifies the natural persons that are considered to be the Beneficial Owners in respect of corporate legal entities, where the exception to the rule is indicated, namely:
”except in cases where a company listed on a regulated market that is subject to disclosure requirements consistent with European Union law or subject to equivalent international standards which ensure adequate transparency of ownership information.”
Our opinion is that paragraph 5 must be interpreted with the whole of § 2. § 2, para. 5 concerns the natural persons who shall be considered as the Beneficial Owner after all possible means have been exhausted and no Beneficial Owner can be established. According to paragraph 1, the companies whose ultimate parent company shares are traded on a regulated market are exempt from the obligation to declare a Beneficial Owner. Therefore, paragraph 5 does not apply to them. Moreover, paragraph 5 has a reference to paragraph 1, which in turn establishes the exception.
The exception introduced, in the case of a company whose shares are traded on a regulated market, which is subject to disclosure requirements in accordance with European Union law or equivalent international standards, ensuring an adequate degree of transparency in ownership is in line with the purpose of the law and points out only that there is no need in the latter hypothesis to declare the natural persons who own the capital of these companies, as there is established legislation, regarding the latter, giving sufficient transparency on the owner of their capital.
The exception is in accordance with the norm of article 59, paragraph 4 of the LMML, i.e. information is collected for legal entities whose shares are traded on a regulated market, which are subject to disclosure requirements in accordance with European Union law or equivalent international standards, providing adequate degree of ownership transparency, subject to disclosure pursuant to Chapter Eleven, Section I of the Public Offering of Securities Act, or similar information on public companies outside the Republic of Bulgaria. The most recent available registers have been considered as a sufficient database for the ownership of the legal entity, for which reason and by the norm of § 2 of the additional provisions of the LMML, an exception was introduced in respect of the same entities.
Ilieva, Voutcheva & Co. Law Firm’s position on the issue is against overburden of commercial companies and we consider declaring a Beneficial Owner of a company with a public company ultimate owner as unnecessary.
