Ordinance no. 2016-1635 of December 1st, 2016, has introduced into French law a new duty to declare beneficial owners of non-listed companies, as a measure aimed at preventing money laundering and financing of terrorism.
The implementation of this duty has been specified by Decree no. 2017-1094 of June 12th, 2017, which brought the new provisions into force as from August 1st, 2017.
I. The duty to declare
Henceforth, companies are obligated to disclose their beneficial owners, meaning the natural person(s) who have ultimate control, directly or indirectly, over the entity.
More specifically, a beneficial owner of a company is defined as any natural person who holds, directly or indirectly, at least 25% of the share capital or voting rights of such company or who otherwise controls such company, by any means, through its management board, its administration, its governance bodies, or the general shareholders’ meeting.
The company’s authorized representative is required to file a document containing, in addition to usual information about the company (company name, form of incorporation…), accurate and up-to-date information on each beneficial owner of the company, namely:
- Family name, given name, pseudonym, first names, date and place of birth, nationality, and personal address;
- The means of control over the company;
- The date on which the person became a beneficial owner of the company.
This document, annexed to the Trade and Companies Register (“RCS”), will be accessible only to the following persons:
- The company that has filed the document;
- Authorities that are specifically mentioned by the law, such as magistrates, customs agents, agents of the public finance administration, supervisory authorities (ACPR, AMF etc.), TRACFIN, etc.;
- Persons charged by law with implementing measures aimed at preventing money laundering and financing of terrorism;
- Any person who can demonstrate a legitimate interest and who is authorized by a judge’s order rendered upon the interested party’s ex parte petition (such decision being subject to appeal).
The duty to declare beneficial owners is a continuing obligation requiring the filing of updated declarations with the RCS whenever changes are made that affect the relevant information on the beneficial owners.
II. Who is subject to the duty
Persons subjected to this duty are:
- companies (commercial and civil companies) and economic interest groupings (“groupement d’intérêt économique” – GIE) with legal personality, whose main registered office is located in a French department;
- commercial companies whose main registered office is not located in a French department but which have an establishment in one of those departments, i.e., secondary establishments, such as a French branch office, of foreign non-listed companies;
- other legal persons that must file for registration in France with the RCS under the applicable statutory or regulatory provisions.
Companies whose securities are traded on a regulated market in France or in another Member State of the Agreement on the European Economic Area, or in another country imposing obligations recognized as equivalent by the European Commission, are exempted from the duty to declare beneficial owners.
This statutory duty is mandatory for all newly registering companies starting from August 1st, 2017. Companies already registered with the RCS before that date have until April 1st, 2018, to comply with the new rules.
The breach of this duty or reporting false information in the required declaration are punishable by up to six months’ imprisonment and a fine of up to €7,500.
The natural person who commits this offense, i.e., the representative of the company required to declare its beneficial owners, can be prohibited from holding any director/officer positions and to a partial deprivation of civil and civic rights.
The President of the Commercial Court can specifically enjoin companies to declare their beneficial owners, either by a sua sponte order or further to an application from the public prosecutor (Procureur de la République) or any person who demonstrates a personal interest in the matter. Such an injunction may be issued, if necessary, under threat of financial penalties for noncompliance.. If a company does not comply with the injunction, the judge can decide either to inform the public prosecutor or to appoint an agent who will accomplish the required formalities on behalf of the company.
Do not hesitate to contact us for any further information or if you would like to receive a model form to fill out when declaring beneficial owners.