On 20 June 2017, the Swedish parliament enacted a law on the registration of beneficial owners, which will come into effect on 1 August 2017. The law aims to increase the transparency of ownership and control of companies, associations, trusts and other associations (legal persons). More than 800,000 legal entities fall within the scope of the act.
Once the act becomes effective, a legal entity will be obliged to notify the Swedish Companies Registration Office of its beneficial owners. The act aims to prevent money laundering and the financing of terrorism and is based on the EU's fourth Anti-Money Laundering Directive, which has been implemented or will be implemented in all EU Member States.
Who falls within the scope of the act?
The duty to notify the Swedish Companies Registration Office will attach to all Swedish legal entities, foreign legal entities operating in Sweden who have not made a corresponding notification in another EEA country, as well as persons domiciled in Sweden who manage trusts or similar legal arrangements. Limited companies listed on a regulated market are among the entities that are exempt from providing notification.
Who is the beneficial owner in the context of a legal entity?
A beneficial owner is (i) any individual who ultimately owns or controls the legal entity and/or (ii) the individual on whose behalf a transaction or activity is being conducted. The latter is characterized as a person enjoying the benefits of someone else’s action.
A beneficial owner is assumed to be the individual who (i) as a result of him or her holding shares or membership interests, directly or indirectly through other legal entities, alone or together with closely related family members, controls more than 25 percent of the total number of votes in the relevant legal entity, (ii) has the right to appoint or remove more than half of the legal entity’s directors or equivalent officials, or (iii) may exercise the equivalent control by agreement with the owner, member or the legal person itself, through provisions in the company’s articles of association, a shareholders’ agreement or similar.
For trusts, the beneficial owner is assumed to be a member of the board of directors, representatives of the trust's trustee, the beneficiary of the trust or the recipient of a substantial part of the funds distributed by the trust.
What are the obligations for the legal entity?
The legal entity (or individual, if applicable) is obligated to investigate, determine and document who its beneficial owners are, and report that to the Swedish Companies Registration Office. The information should include details on the beneficial owners’ interest in the legal entity. The information has to be kept updated and must thus be checked, to the extent that the circumstances require. Old information must be saved for five years from the last change of beneficial ownership.
When must the notification be made?
A first notification must be made by 31 January 2018. Even if there is no beneficial owner, that has to be reported. Legal entities incorporated after the act comes into force must report its beneficial owner within four weeks after incorporation. If the beneficial owner changes, such changes must be reported to the Swedish Companies Registration Office as soon as the legal entity becomes aware of these.
What happens if no notification is made?
If no notification is provided, or if the notification is incomplete or contains incorrect information, the Swedish Companies Registration Office may order the managing director, a board member or any other similar official to provide the notice, under penalty of a fine. This also applies if an entity refuses to provide relevant information to a governmental authority requesting certain information. If the order is not complied with, the Swedish Companies Registration Office may impose a fine and further failure to comply may attract an additional fine.
To whom will the information on the beneficial ownership be accessible?
The legal entity must, without delay, at the request of a governmental authority, provide information about its beneficial owner(s). Such information must also be disclosed to, inter alia, a bank during its KYC work. The information reported to the Swedish Companies Registration Office will also be publicly available to anyone who requests the information.
Does your company need help or do you have any questions?
Advokatfirman Lindahl is happy to assist you in connection with any issue that arises in relation to the new act. Please let us know if you want us to help you or your company complete the notifications required by the act, or if you have any questions about the impact the new legislation may have on you or your business.
Contact details to all our offices can be found here