What is it like to date a controlling person

On January 15, 2018, the Beneficial Owners Register Act (WiEReG) comes into force. It aims to make the beneficial owners of companies and other legal entities visible. The eponymous “Register of Beneficial Owners” is created for this purpose. The Viennese law firm CMS Reich-Rohrwig Hainz has analyzed the new law.

CMS Reich-Rohrwig Hainz gives the partial all-clear: A large number of companies in Austria are not affected by this new reporting requirement. Nevertheless: The regulations of this register are complex and whether the sensitive penalties of up to € 200,000 should be taken seriously.

Private foundations must name beneficiaries

By June 1, 2018, all significant (25% + 1) natural persons involved or otherwise controlling natural persons of a company entered in the commercial register must be entered in this register. With the WiReG, private foundations will for the first time have to enter not only founders and board members but also their beneficiaries in a central, albeit limited, public register.

Affects all legal entities in the commercial register and trusts

As a rule of thumb, it can be said that all legal entities that are registered in the Austrian commercial register (in particular GmbH, KG, OG, AG, private foundation, cooperatives) are subject to the WiEReG. In addition, there are associations, some legal entities under public law and, in particular, “trusts” domiciled in Germany. CMS Reich-Rohrwig Hainz explains: "Trust" describes every legal relationship in which a person (trustee) Assets that another person has dedicated (trustor), for the benefit of other people (beneficiary /beneficiary) managed on a permanent basis. Pure trusteeships, as in the handling of real estate transactions or other trusteeships that only separate legal and beneficial ownership, are not included.

Natural owners do not have to be reported

One exception in advance: If only natural persons are the beneficial owners of a legal entity and these are entered in the commercial register, there isnoReporting requirement. According to CMS Reich-Rohrwig Hainz, a large number of companies in Austria should not be subject to reporting under the WiREG.

Who has to be reported in the affected companies?

  • Natural persons who control 25% + 1 of the shares (shares, company shares, etc.) or otherwise control the company; (Example: A holds 30% of B-GmbH)
  • Natural persons who are one or moreother Control legal entities that individually or collectively hold 25% + 1 of the shares in the relevant legal entity; (E.g.:A holds 60% in C-GmbH, which holds 30% in B-GmbH; or A holds 60% each in C-GmbH and D-GmbH, which each hold 15% in B-GmbH.)

"Control" in the sense of the regulation exists if a person 50% +1 who holds shares, can appoint the management bodies or otherwise exercises a controlling influence (e.g. also through syndicate agreements or on the basis of a trust).

Managers can also be addressed

If no beneficial owner can be determined according to these principles (e.g. five shareholders, each with a 20% stake), the managers of the respective company must be entered in the register.

Own rules for foundations

For foundations that are ownerless, the founders and beneficiaries as well as the foundation board must be entered. Associations only have to submit a report if a natural person exercises control over them, for example because they have the right to appoint the association's organs.
The WiEReG aims to record the natural person or persons (a legal entity can have several beneficial owners) who determine the fate of a company based on the actual and economic circumstances. If a company has such a person, it can be assumed that there is a reporting obligation under the WiEReG.

What should I do?

The management bodies of each company must report the beneficial owners by June 1, 2018 and then disclose this within four weeks of a change in the beneficial owner or his data (e.g. residence or ownership structure). The management bodies also have to review their beneficial owners once a year. The beneficial owners are always obliged to cooperate and must, for example, submit meaningful documents (foreign register extracts, identity cards, etc.).

Input via usp.gv.at

The register is kept by the Federal Statistics Austria on behalf of the finance minister, whereby the entries over the already existing Corporate service portaltake place as a central e-government platform.

Who can see the register?

The register cannot be viewed by everyone, such as the company or land register, but numerous groups of people have access to the register:

  • all credit institutions,
  • Auditors,
  • Tax consultant,
  • Lawyers,
  • Notaries, too
  • Real estate agent,
  • Business consultant and
  • Insurance intermediary.

They are allowed to inspect the register in order to fulfill their obligations in relation to their clients in the context of money laundering prevention and terrorist financing (keyword: Know Your Customer). These persons can inspect them without prior authorization via the company service portal, so that unauthorized inspections cannot be prevented in individual cases, but can only be penalized ex-post (up to EUR 10,000 fine).
In addition, numerous authorities (tax offices, financial criminal authorities, supervisory authorities, public prosecutor's office) have inspection rights as part of their statutory duties.

Drastic penalties

If a legal entity violates its reporting obligation intentionally or through gross negligence, it faces financial penalties of up to EUR 200,000 (intent) or EUR 100,000 (gross negligence) - i.e. primarily its management bodies. A registration can also be obtained with coercive penalties. According to CMS Reich-Rohrwig Hainz, it is striking that the obligation of the beneficial owners to cooperate is not subject to sanctions. And this, although the managing directors will often be dependent on the cooperation of the owners. Therefore, the lawyers suggest, from the point of view of the management bodies, to introduce a regulation in the articles of association or the articles of association, which obliges the partners to disclose their respective beneficial owners or trust relationships together with appropriate evidence; otherwise the shareholder has an obligation to compensate for penalties imposed on the managing director or the legal entity.

That is to be done

All legal persons should ensure by June 1, 2018 at the latest whether they have to register one of their shareholders as beneficial owners in the beneficial owners register. Private foundations in particular have a need for action and must report their beneficiaries, in addition to the founder and the foundation board members, to the register.

more on the subject

CMS Reich-Rohrwig Hainz: More perspective than many would like - the beneficial owner registration law