The UBO register has made Dutch headlines on several occasions this month. Earlier this month, word got out that a large number of Dutch legal entities has not yet complied with a new law obliging them to register their ultimate beneficial owners. Last week, the Court of Justice of the European Union gave an important judgment about the public accessibility of the registered data. This judgment, which will be discussed later on in this article, is particularly relevant for shareholders and beneficiaries of (family) businesses, family offices and trust entities.
Background
Dutch companies, associations, foundations and other legal entities are legally obliged to register their ultimate beneficiary owners (UBOs) in the Dutch UBO register. The UBOs of commercial enterprises are usually persons who (directly or through one or more holding companies) hold a share interest of at least 25%. The UBOs of entities that have been set up to manage (private) wealth are usually the (ultimate) beneficiaries of such entities’ assets. The UBO register has been introduced as a result of new European legislation, but there is no central European UBO register. Instead, each member state has its own UBO register. The Dutch UBO register is administered by the Dutch Chamber of Commerce (Kamer van Koophandel). Since 27 March 2022, each legal entity registered in the trade register (handelsregister) of the Chamber of Commerce is obliged to have its UBO(s) registered with the Chamber of Commerce. Since that date, entities that do not comply with this obligation are acting in violation of the law. This also applies to legal entities that have little legal ties to the Netherlands, such as (holding) companies that are part of a foreign legal structure.
The Ministry of Finance recently announced that many legal entities are in violation of their obligation to register their UBOs with the Chamber of Commerce. Approximately one in three Dutch legal entities has not (yet) done so. The Minister of Finance has announced that the Economic Enforcement Bureau (Bureau Economische Handhaving) will start enforcing the obligation.
Registering UBOs in national UBO registers is meant to facilitate the investigation of money laundering, fraud and terrorist financing. But until last week, investigative authorities were not the only ones who had access to the data registered in the national UBO registers. Personal data registered in the Dutch UBO register were publicly and easily accessible to anyone through the Chamber of Commerce’s website. It is not very surprising that many parties, especially shareholders and beneficiaries of family businesses, family offices and trust entities, have resisted registration and publication of their personal data because they felt it invaded their privacy. These privacy concerns may explain why so many Dutch legal entities have not yet registered their UBOs.
Judgment
On 22 November 2022, the Court of Justice of the European Union gave a judgment in proceedings between the Luxembourg equivalent of the Chamber of Commerce and a Luxembourg company that refused to register its UBO(s). Although this appears to be a Luxembourg issue, the court’s judgment has major consequences in the entire EU, and is good news for people who are not too happy to share with the world that they are shareholder or beneficiary of a legal entity. This is because the court scrapped public access to the Luxembourg UBO register. According to the court, public accessibility of the personal data registered in the UBO register constitutes a serious interference with the fundamental right to respect for the UBOs’ private lives in general and to protection of their personal data in particular. The information registered in the UBO register should only be accessible to parties with a legitimate interest, such as investigative authorities charged with investigating money laundering, fraud and terrorist financing.
Consequences in the Netherlands
Because national UBO registers in EU member states were publicly accessible until last week, the court’s judgment has consequences for the entire EU. Immediately after the judgment was given, the (Dutch) Minister of Finance asked the Chamber of Commerce to halt public access to the UBO register with immediate effect. This happened: the Dutch UBO register can no longer be accessed. As of yet, it is unclear if it will stay this way. It is expected that the UBO register will become accessible for governmental authorities and credit institutions, as well as other parties that may have a legitimate interest in accessing the registered data, such as civil law notaries and even journalists. But the court’s judgment leaves little room for unlimited reopening of the UBO register to the general public.
The judgment does not affect the obligation to register an entity’s UBO(s). Legal entities that have not yet registered their UBO(s), are still obliged to do this. The Minister has previously announced that the Ministry would await enforcement of this obligation until the European court had rendered its judgment in the Luxembourg proceedings. Now that this has happened without the court scrapping the UBO register altogether (only public access to the UBO register has been scrapped), legal entities that have not (yet) registered their UBO(s) should expect (economic) sanctions to be imposed on them.