What’s new on Beneficial Ownership

The Provision requires that details of beneficial ownership must be reported within 60 days from the Provision’s publication in the Official Gazette. These details must therefore be submitted to the competent Chambers of Commerce by 11 December 2023 (there is a proposal to postpone this deadline to 6 February 2024, but not yet confirmed).   

Following the go-ahead for the operation of the UBO Register, on 21 November 2023, the Ministry of Economy and Finance (MEF), the Bank of Italy (BOI) and the Financial Intelligence Unit (FIU) published some FAQs on Beneficial Ownership and the UBO Register (the UBO FAQs), with the aim of clarifying some grey areas.

The FAQs relating to Beneficial Ownership and the UBO Register

The UBO FAQs, jointly developed by the BOI, the MEF and the FIU, clarify some issues relating to beneficial ownership and the UBO Register: profiles that had raised doubts among operators in the sector – particularly obliged entities required to identify the beneficial owners of their customers – and among entities required to report to the UBO Register, pursuant to the Anti-Money Laundering Decree.  

The topics of greatest interest are:

Identifying the UBO in case of enforcement or insolvency proceedings and qualification, for the purpose of the customer due diligence, of the person authorized by judicial authorities in the context of those enforcement or insolvency proceedings to open the business relationship

The UBO FAQs specify that beneficial ownership in these cases is to be determined with regard to the entity that is subject to the enforcement or insolvency procedure, as the “ultimate beneficial owner”: i.e. a designated entity against whom the legal system stipulates that such procedure can start. In the case of a client other than a natural person, the criteria set out in Article 20 of the Anti-Money Laundering Decree apply, referencing the ownership structure at the time of initiation of the enforcement or insolvency proceedings. In this context, the delegated professional in real estate enforcement proceedings, the bankruptcy Receiver (and similar figures), must be identified as “executors”, pursuant to Article 1, paragraph 2, letter (p), of the Anti-Money Laundering Decree.

Identifying the UBO in the case of indirect ownership where controlled entities are present in the shareholding chain

The UBO FAQs remind that, for the purposes of identifying the beneficial owner of a company, Article 20, paragraph 2, of the Anti-Money Laundering Decree stipulates a threshold of a 25% shareholding of a company’s share capital; a shareholder with a shareholding above 25% will result in that shareholder being considered the beneficial owner of the company itself. This threshold applies both in the case of direct ownership (shareholding held directly by a natural person) and indirect ownership (shareholding held indirectly through subsidiaries, through trust companies, or through an intermediary).

The UBO FAQs specify that in the case of indirect ownership through subsidiaries, the threshold of 25% +1 must be considered exclusively in relation to the capital of the client company, then must follow the shareholding chain to identify the natural person or persons who exercise control pursuant to Article 2359, paragraph 1, of the Italian Civil Code.

Identifying the UBO in the case of a chain of shareholdings headed by an entity or company whose ownership or control is not attributable to one or more natural persons

Important clarification is provided in relation to the identification of the ultimate beneficial owner in the event of a shareholding chain headed by an entity or company whose ownership or control is not attributable to one or more natural persons, such as a company with widespread shareholding or cooperatives. In this case, the regulator seems to suggest that the residual criterion referred to in Article 20, paragraph 5, of the Anti-Money Laundering Decree should be applied.

Application of the residual criterion in limited liability companies

The UBO FAQs clarify that in applying the residual criterion referred to in Article 20, paragraph 5, of the Anti-Money Laundering Decree, the beneficial owner must be identified as the person holding powers of legal representation, administration or management (such as, for example, the legal representative, executive directors or general managers of the company) not necessarily cumulatively, but by identifying the natural person or persons who hold ultimate authority over the management of the company and the power to bind it with third parties. To identify this person, it will therefore be necessary to determine and verify the specific organisational structure of each entity.

In addition to the above, the UBO FAQs also provide clarification in relation to: (i) the identification of the UBO where the customer is a public administration or ecclesiastical body, as well as the obligations for the latter bodies to notify their UBO to the Companies Registry; (ii) the hierarchical order of the criteria used in identifying the UBO of a company; (iii) the identification of the UBO in banking foundations and in relation to usufructs or pledges on shares or shareholdings; (iv) any undertakings to which the obligations to disclose data and beneficial ownership information apply; and (vi) any discrepancies between the beneficial ownership data collected during the customer due diligence and those in the UBO Register.

If you have any questions or need any assistance regarding the topic above, please do not hesitate to contact us.

Emanuela Semino, Consultant, co-authored this publication.