knowledge 15 July 2020 |

Beneficial Ownership: Central Register for ICAVs, Credit Unions and Unit Trusts

Background

Article 30 of the EU’s Fourth Money Laundering Directive (the “Directive”) requires EU Member States, among other things, to require corporate and other legal entities:

• to obtain and hold adequate, accurate and current information on their beneficial ownership; and
• to ensure that the details of their beneficial ownership is held on a central register.

In the case of certain corporate entities, this requirement is transposed into Irish law by the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019 (the “2019 Regulations”) which require inscope corporate entities (including UCITS and AIFs established as investment companies) to file their beneficial ownership information in a Central Register of Beneficial Ownership of Companies and Industrial and Provident Societies. For further details see here and here.

In the case of express trusts, the first of these obligations was transposed via the European Union (Anti-Money Laundering: Beneficial Ownership of Trusts) Regulations 2019 (the “Trust Regulations”), which came into effect on 29 January 2019.  For further details see our briefing here.

The Regulations, which amend the 2019 Regulations, transpose the second of these obligations into Irish law for applicable financial vehicles.

Overview

The Regulations modify Part 3 of the 2019 Regulations in respect of applicable financial vehicles to provide:

• for the establishment and maintenance of a Central Register of Beneficial Ownership of Irish Collective Asset-management Vehicles, Credit Unions and Unit Trusts (the “Central Register”), including a requirement for an applicable financial vehicle to provide specified information to the Central Register;

• for the appointment of a Registrar of Beneficial Ownership of Irish Collective Asset-management Vehicles, Credit Unions and Unit Trusts (the “Registrar”) - the Central Bank of Ireland (“Central Bank”) has been appointed as Registrar; and

• that the Central Register will be maintained by the Registrar to whom the beneficial ownership information will be submitted - the Regulations include provisions for resourcing the Central Bank in its performance of the function as Registrar, including that the Central Bank Commission make provision for “dedicated levies” to be paid by applicable financial vehicles.

An applicable financial vehicle that:

• was in existence before the commencement date of the Regulations (ie., 25 June 2020) must register its beneficial ownership details with the Registrar within 6 months (ie., by 25 December 2020);  

• comes into existence on or after the commencement date of the Regulations must register its beneficial ownership details with the Registrar within 6 months from the date of its coming into existence. 

The information to be filed with the Registrar largely reflects the information required to be filed by relevant companies under the 2019 Regulations, however there is no requirement for beneficial owners of unit trusts to provide a PPS number for verification purposes. 

The Register and Unit Trusts

Prior to the publication of the Regulations, there was significant industry concern regarding the anticipated introduction of a requirement to deliver the beneficial ownership information of a unit trust to a central register, due to the definition of “beneficial ownership” set out in the Directive, which definition is also used for the purposes of the 2019 Regulations and of the Trust Regulations. Specifically, in the case of a trust, the Directive defines this term to include not only the relevant trust’s trustees and settlors but also its beneficiaries.

Ultimately, however, the Regulations contain a bespoke definition of “beneficial ownership” for the purposes of a unit trust, so that, in addition to the trustees and settlors, only a natural person that a) owns, or is ultimately entitled to control, more than 25% of the units in the entity; or b) exercise ultimate control over the trust, will be considered to be the beneficial owner. According to the Regulations, this is to take account “of the characteristics of a unit trust and, in particular, that beneficial ownership of such a trust, in the context of Article 30 of the Directive, is not to be equated with every instance in which one or more units in such a trust are held by a particular natural person”.   

The Regulations also provide that it is the unit trust’s management company that is responsible for complying with the unit trust’s obligations under the 2019 Regulations, including the obligation to file beneficial ownership information with the Registrar.  Any obligations owed by a person to a unit trust, must also be discharged by that person’s doing (or, not doing) the act concerned in relation to the management company of the unit trust.

As mentioned, existing ICAVs, unit trusts and credit unions have until 25 December 2020 to file their beneficial ownership information. The Central Bank will shortly have a Portal available on its website allowing for submission of the required information and a notification of when the required information can be submitted to the Portal will be published on the Central Bank’s website. 

Next Steps and Comment

The practical approach taken by the Regulations to the definition of beneficial ownership for the purposes of the reporting obligation is to be welcomed and makes the reporting requirement consistent with the requirement that applies to other fund vehicles such as investment companies and ICAVs. While there are a number of difficulties regarding the interplay between the Regulations and each of the 2019 Regulations and the Trust Regulations, hopefully these will be cleared up in due course.

While currently there are no obligations under Irish law for investment limited partnerships and common contractual funds to file details of their beneficial ownership information, according to the Central Bank, the Register will be extended to cover such entities in due course. In addition, a central register in respect of beneficial ownership of trusts will be established.