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Beneficial Ownership - How to Avoid Rejection!

AUTHOR(S): Fergus Bolster
PRACTICE AREA GROUP: Corporate
DATE: 15.10.2019

Update November 2019: The Registrar has announced that the technical aspects of the BEN2 process have been finalised so that forms can now be uploaded onto the RBO system.  The Registrar has advised that under no circumstances should presenters e-mail, post or deliver the Form BEN2 to the RBO in paper form.

With the 22 November deadline impending, less than 10% of companies have successfully filed beneficial ownership details according to the Registrar of Beneficial Ownership of Companies (Registrar). Rejection rates are currently running at 26%.

Here we give a flavour of some of the practical issues to watch out for when complying with the Beneficial Ownership Regulations 2019.  As always, we are on hand to help our clients navigate this new legal regime.

What must Irish companies do?

Since 2016, most Irish companies must obtain and confirm their beneficial ownership details and keep their internal beneficial ownership registers current and accurate. Since June 2019, a further obligation exists which is to make a public filing of those beneficial ownership details in the Central Register of Beneficial Ownership of Companies (RBO) within prescribed time frames. Failure to comply with these obligations could result in criminal penalties being imposed on companies and directors.

How can a company demonstrate that it has taken “all reasonable steps” to identify its beneficial owner?

The degree of investigation required depends on the type of company involved and the actual knowledge of its directors. At a minimum, periodic consideration should be given to beneficial ownership at board meetings and the company should adopt procedures for the review of the register of members at appropriate intervals.  These actions should be recorded in the board minutes.  This addresses the requirement to keep records of the actions taken in order to identify the company’s beneficial owner(s).

Where the company is an Irish subsidiary of a listed company, arrangements should be put in place to establish and monitor beneficial ownership (based on shareholder disclosure requirements in the parent entity) and we can advise further on this. Beneficial ownership due diligence is now a feature of share purchase and subscription transactions.

A company should also have procedures in place to update its internal register and the RBO, as appropriate, when a Regulation 12 or 13 notice is received and should issue a Regulation 7, 9 or 11 notice where required (as explained in our previous updates). 

Why so many rejections?

The Registrar has published the main reasons for the surprisingly high level of rejections. For data protection reasons, the Registrar has no direct access to the personal details held by the State in relation to any beneficial owner. Once a filing is made on the RBO, the Registrar verifies the name, date of birth and the PPSN (Irish social security number) of the beneficial owner, via an electronic interface, against information held by the Department of Employment Affairs and Social Protection (DEASP). Details are not verified against information held by the Irish Revenue Commissioners or the Companies Registration Office. 

If there is the slightest mismatch between the name and PPSN filed as against the personal information held on the DEASP system, the RBO submission will be rejected.  A letter is then sent directly to the “data subject” (beneficial owner) stating that an (unspecified) error has occurred in the data matching process in the RBO. The beneficial owner must then try to establish the reason for the mismatch (by contacting a branch of DEASP) before a further submission can be attempted by the presenter.

It’s important, therefore, to carefully check all details gathered to minimise the chances of rejection. It’s also worth noting that the system will not save draft submissions.

What happens if a beneficial owner does not have an Irish social security number (PPSN)?

Not every beneficial owner or deemed beneficial owner will have a PPSN. As explained in our previous updates, the company’s directors are deemed to be its beneficial owners where the company has no identifiable beneficial owner (as defined).

Individuals without a PPSN must complete a Form BEN2 which is then used by the RBO to verify that individual’s identity. The name, address, date of birth and nationality of the individual must be stated in the form and a declaration made that the information provided is true.  In Ireland, this declaration can be made before a notary public, commissioner for oaths, solicitor or the usual classes of person entitled to take statutory declarations.  Outside Ireland, the declaration must be made before a notary public practising in the place where the declaration is sworn.  We anticipate that practical difficulties may arise where the notary is required to use their own prescribed form of notary certificate to attest the signature and is unwilling to sign Part C of the form itself. 

Only one BEN2 is needed for each beneficial owner (or deemed beneficial owner). Once an RBO Number has been issued, that number can be used for making future beneficial ownership filings for that person.

The RBO is currently finalising the technical aspects of the BEN2 process and will announce when it is ready. In the meantime, Forms BEN2 cannot be uploaded onto the RBO system and any completed forms should be retained by companies.

What are the timelines for public filings?

The deadlines for RBO filings are:

  • Companies in existence before 22 June 2019: 22 November 2019
  • Companies incorporated on or after 22 June 2019: five months from the date of incorporation
  • Companies having received details of changes to beneficial ownership: within 14 days of the updating of the internal register

If you have any questions about beneficial ownership of companies, please get in touch with your usual Matheson contact who will be happy to advise.

This document was co-authored by Dorothy Hargaden, professional support lawyer of Matheson’s Corporate and Commercial Group.
 

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