From 1 August 2017, the incorporation of commercial companies will give rise to a new obligation requiring new legal entities to file a document relating to their beneficial owners, which makes it possible to determine who ultimately controls the legal entity thus incorporated. Decree 2017-1094 of 12 June 2017 relating to the register of beneficial owners was published in the Official Gazette of 14 June 2017, which entails the entry into force of this new obligation.
The Sapin II Law of 29 December 2016 introduced a new Article L. 561-46 of the French Monetary and Financial Code, which provides that the companies and legal entities referred to in 2 °, 3 ° and 5 ° of Article L. 123-1 of the French Commercial Code (with the exception of listed companies) are required to obtain and maintain accurate and up-to-date information on their beneficial owners, as defined in Article L. 561-2-2 and Articles R 561 -1 to R. 561-3 of the French Monetary and Financial Code.
This concerns companies and economic interest groups having legal status and with headquarters in a French department (Commercial Code Article L. 123-1 2 °), commercial companies with head offices outside a French department and which have an establishment in one of these departments (Commercial Code, Article L. 123-1 3 °), and any other legal entities whose registration is provided for by the laws or regulations (Commercial Code, Article L. 123-1 5 °), provided that these various companies or entities are established in French territory.
All these entities are obliged, under the aforementioned Article L. 541-46, to disclose the identity of their beneficial owners. The actual beneficial owners of such legal entities shall be defined as the natural person or persons who ultimately control them directly or indirectly. In this regard, "beneficial owner" refers to the natural person or persons who either hold, directly or indirectly, more than 25% of the capital or of the voting rights of the company, or exercise, by any other means, a power of control on the management, administrative or governing bodies of the company or the general meeting of its partners.
Where the incorporated legal entity is an investment fund, the beneficial owner of the operation is the natural person or persons who hold, directly or indirectly, more than 25% of the units or shares of the fund, a power of control over the administrative or management bodies of the investment fund or, where appropriate, of the management company or portfolio management company representing it.
It appears that the notion of “control” over the various bodies of company, which is one of the criteria for determining beneficial ownership, remains rather imprecise and could give rise to some difficulties of application.
Decree 2017-1094 of 12 June 2017, however, specifies the filing terms and conditions and the content of the document intended to reveal the identity of the beneficial owner or owners of commercial companies and consortiums that are registered, as well as the conditions of communication to competent persons and entities subject to AML/CFT obligations.
It sets out the procedure whereby any person with a legitimate interest can refer the matter to the RCS supervisory judge to obtain authorisation for release of the document relating to the beneficial owner. It lays down the procedural rules applicable to the civil injunction process provided for by the order of 1 December 2016, in the event of non-filing of the document in question.
The text will come into force on 1 August 2017. All companies incorporated after this date must file the document relating to their beneficial owners with the Registry, as referred to in the Decree of 12 June 2017. Companies registered before 1 August 2017 shall have until 1 April 2018 to comply with the provisions of this Decree and file the document relating to their beneficial owners.
In accordance with the decree of 12 June 2017, the document relating to the beneficial owner is deposited with the Registry of the Commercial Court, to be annexed to the Trade and Companies Register, at the time of application for registration or at the latest within a period of fifteen days from issue of the receipt for filing a business creation application. A new document shall be filed within thirty days of any fact or act requiring the rectification or completion of the information referred to therein (Monetary and Financial Code, Art. R. 561-55).
The document relating to the beneficial owner shall be dated and signed by the legal representative of the company or legal entity making the filing.
This document shall contain the following information, referred to in Article R. 561-56 of the Monetary and Financial Code:
1. in the case of the company or legal entity, its name, its legal form, the address of its registered office and, if applicable, its unique identification number completed by the words RCS followed by the name of the city where the registry used by the company is located.
2. As regards the beneficial owner:
The decree then specifies, in a restrictive manner, the persons entitled to request the disclosure of the beneficial ownership document as well as the injunction procedure (which can be ordered under penalty payment) applicable to the company which has not complied with its reporting obligations. It is therefore necessary as soon as possible to anticipate this new reporting formality applicable to commercial companies whatever their date of registration.
It should also be recalled that failure to comply this statement requirement regarding the identity of the ultimate beneficial owner(s) triggers criminal sanctions. Indeed, article L. 561-49 of the French Monetary and Financial Code provides that the failure of filing the document relative to the ultimate beneficial owner(s) or the filing of inaccurate or incomplete information is punishable by six months of imprisonment and a € 7.500 fine. Individuals found guilty of this offense also incur the prohibition of running a business or partial deprivation of civil and civic rights. The individuals aim by this sanction should mainly concern the legal representative of the company subject to this obligation, who are required to sign the ultimate beneficial owner(s) statement to be filed at the registry.
Regarding legal persons convicted of this offense (which should concern the legal person subject and / or the legal representative of the subject company), the amount of the fine is five times the amount applicable to individuals, i.e. 37.500 euros. In addition, these legal persons may be sentenced to the additional penalties referred to in paragraphs 1 °, 3 °, 4 °, 5 °, 6 °, 7 ° and 9 ° of article 131-39 of the French Criminal Code: dissolution, placement under judicial supervision, exclusion from public contracts, prohibition of making public offerings of financial securities or having its securities admitted to trading on a regulated market, posting of the decision pronounced or its dissemination by the written press or by any means of electronical communication to the public.
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