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Revealing the Beneficial Owners – More Transparency or More Bureaucracy?

Revealing the Beneficial Owners – More Transparency or More Bureaucracy?

Serbia
Typography

Need for Transparency

The Act on Centralized Record of Beneficial owners (hereinafter the “Act”), came into force on June 8, 2018. This is just one of the measures taken by Serbian authorities in order to enhance transparency of business in Serbia. The Act was enacted only a few months after Serbia was identified as a jurisdiction that has strategic anti-money laundering/combating the financing of terrorism deficiencies by the Financial Action Task Force – an inter-governmental body with the objective to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. The Act is just one in a range of measures taken by the Government of Serbia in recent months.

Centralized Record

The Centralized Record is a database of beneficial owners of companies registered in Serbia.  For the purpose of the Act, a beneficial owner is:

  • a natural person having, directly or indirectly, a 25% or larger share of a company or is an owner of 25% or more of a company’s capital;
  • a natural person with a prevailing influence on managing the business of a company;
  • a natural person that provides, or has provided, funds for a company and therefore has a substantial influence on decision making in a company with regard to finance and business decisions;
  • a natural person who is the founder, trustee protector or user, if appointed, as well as a person having a dominant position in a trust or another entity established under foreign laws;
  • a natural person registered to represent a cooperative, NGO, foundation, endowment or an institution if the person authorized for representation did not report another person as the beneficial owner.

The Act applies to all types of companies from the Serbian Companies Act, except for public joint stock companies.

The Acts stipulates a criminal offense for trying to hide the beneficial owner or for entering false information into the Centralized Record, punishable with up to 5 years in prison and a misdemeanor for violating the deadline for registering the beneficial owner or not keeping the information about the beneficial owner.

Data

The Act stipulates that the data required is all-encompassing – detailed information on either a business entity (owners, capital, bank accounts), or on a natural person, including all personal information, but also the basis for acquiring ownership.

Existing companies have to determine their beneficial owners within 30 days from the day the Act came into force. When changes in the ownership structures are made, new data has to be determined and subsequently filed with the Serbian Business Register Agency (hereinafter the “SBRA”) as well.

All new companies will have to file information on beneficial owners with the registration forms.

The SBRA will maintain the Centralized Record and publish all the relevant information on its webpage.

The companies have to keep records on their beneficial owner for 10 years from the day of registering the data, and the SBRA will keep the record permanently.

Possible Consequences

The ratio for enacting the Act is clear since the transparency is becoming more and more important in the modern globalized world because of terrorism and money laundering.  However, existing experience shows that gathering data on beneficial owners, which was already requested by some banks when opening accounts, can be difficult and time consuming for complex business entities.  It is possible that the Act will slow down incorporation of new business companies in Serbia and turn away some prospective investors.

By Milan Samardzic, Partner and Dušan Dincic, Senior Associate, Samardzic, Oreski & Grbovic

Serbia Knowledge Partner

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