In accordance with Section 1(5)(a) of the Law on the Prevention of Money Laundering and Terrorism Financing (hereinafter referred to as the Law), the true beneficiary is a natural person, the owner of a legal person or who controls a legal person, or in the name, in the interest of which a business relationship is established or a transaction of an occasional nature is carried out, and in the case of legal persons at least, a natural person who, in the form of a direct or indirect holding, holds more than 25 per cent of the capital shares or voting shares of the legal person or who controls them directly or indirectly.
That provision lays down the characteristics of the true beneficiaries, i.e. the true beneficiary is always the natural person who owns or is in the interest of which a particular legal person is established or operates, or whose direct or indirect control over the legal person is exercised. In the case of direct participation or control, the true beneficiary shall be directly controlled by the legal person, while in the case of indirect participation or control, the control shall be exercised through another person, whether natural or legal.
In the guidelines 'Transparency and true beneficiaries' issued by the Financial Transaction Task Force (FATF) in October 2014, the true beneficiaries are interpreted as the natural person who 'ultimately' owns or controls the 'client' and/or the natural person for whom the transaction is being carried out. It also includes those persons exercising final control over the legal person. 'Ultimately owned or controlled' and 'exercising final control' refers to situations where ownership/control is exercised through ownership or other means of control other than direct control. A fundamental feature of the definition of the beneficiary is that it goes beyond legal ownership and control. The FATF definition focuses on a natural person who actually owns a legal person, who exercises the powers of senior management of a legal person or the assets of a legal person, as well as a natural person exercising effective control over the legal person (whether or not the person holds an official position in the legal person).
Direct participation in the case of s or control shall be indicated by the true beneficiary directly controlling the legal person and may result from the exercise of ownership or lawful control (e.g. a member of the board). However, in the case of indirect participation or control, the control shall be exercised through another person, whether natural or legal. Indirect control may be exercised by a variety of means, such as a mutually concluded agreement or by means of a dominant influence (for example, the dominant influence of a member, shareholder or board member in a capital company), by financing a capital company using creative links or contractual obligations. Similarly, shareholders or shareholders of a capital company may cooperate with each other to increase such indirect control through another person by entering into formal or informal agreements, as well as by exercising their powers to appoint senior management in a capital company.
The law does not contain a specific framework for the obligations specified, depending on the nature, nature or purpose of the legal person's activities.
The definition of a capital company is defined in Article 134 of the Commercial Law. A capital company is a commercial company whose share capital consists of the total nominal values of shares or shares. A capital company is a limited liability company or a public limited liability company. A limited liability company is a closed company, parts of which are not an object of public circulation, while a public limited liability company is an open company, parts of which (shares) may be an object of public circulation. The true beneficiary of a capital company can therefore be identified primarily by clarifying the direct or indirect owners of shares or shares.
In view of the true definition of beneficiaries, it is always possible to identify in capital companies the true beneficiary in cases where shares or shares of a capital company are owned by at least one natural person, either directly or indirectly, for more than 25%. That natural person, unless acting on behalf of another natural person, shall be the true beneficiary of the capital company concerned. It is understood that if there are several (not more than three) natural persons in a capital company who correspond to the description above, they shall all be regarded as the true beneficiaries of the capital company.
The 25% threshold referred to in the Law shall be stated to be the absolute minimum when the true beneficiary is always identified. At the same time, there can be many and different cases of control over a capital company in practice. For example, a number of participants (shareholders) have agreed on the procedures for exercising voting rights, including but not limited to:
- (a) by agreeing that any of the members (shareholders) will always vote in exactly the same way as another member (shareholder);
- (b) by agreeing that a member (shareholder) with a high percentage of shares will not come to meetings in order to allow a member (shareholder) with a lower percentage to take decisions;
- (c) by agreement that someone may single-handedly appoint a majority of the Board or the Governing Board, etc.
There may also be a situation where one natural person has a stake (shares) of less than 25%, either directly or indirectly, but the percentage (shareholders) of the other members (shareholders) is so small, as well as those members (shareholders) do not actually attend meetings of members (shareholders), that it is apparent that a natural person with the most shares (shares) () the percentage shall also be controlled by a capital company. Similarly, control in capital companies shall be determined in cases in which several members (shareholders) are legal persons controlled by the same natural person. It should be noted that it is not possible to provide an explanation of all situations, since each case is individual and the board of the legal person needs to know (to be clarified) whether a natural person has real control in the legal person.
In addition, it should be noted that:
- if the owner of shares or shares of a capital company is a legal arrangement (for example, a type of rightholder not recognised in the Republic of Latvia - trust), the definition of the true beneficiary referred to in Article 1(5)(b) of the Law shall apply to the clarification of the true beneficiary. According to that provision, the true beneficiary is a natural person who is the owner of a legal person or who controls a legal person, or on whose behalf a business relationship is established or a case-by-case transaction is carried out, and is at least, in the case of legal arrangements, the natural person who owns or in the interest of whom a legal arrangement has been established or is operating or exercise, directly or indirectly, control over it, including which is the founder, trustee or supervisor (manager) of such a arrangement. In the light of this, it is necessary, in such a case, to identify the true beneficiary in the legal arrangement in accordance with the above definition;
- according to the Law 18. For Section 2, Paragraph six, a legal person may not provide the Enterprise Register of the Republic of Latvia with information about the true beneficiary if the true beneficiary is a shareholder in a stock company whose shares are listed on the regulated market and the way in which control over the legal person is exercised arises only from the status of the shareholder. In the light of the above, if one of the shareholders or shareholders of a capital company is subject to the case referred to above, the capital company may indicate, when submitting information in the Enterprise Register of the Republic of Latvia, that the true beneficiary is a shareholder in a company whose shares are listed on the regulated market and the way in which control over the legal person is exercised, only derives from the status of the shareholder.
It must be noted that the legal person is a legal fiction, followed in each case by natural persons who organise, manage or control it, so that there is no situation where the true beneficiary is not — it may not be possible to clarify it in accordance with the definition laid down in the Law. Consequently, the Law does not provide for the registration in the registers carried by the Enterprise Register of information that a legal person does not have a genuine benefit.
In cases where a capital company has made use of all possible means of clearance and has concluded that it is not possible to identify any natural person, THE PLG, and doubts that the capital company has the true beneficiary, it must be confirmed in the application, specifying the grounds.
At the same time, it should be noted that in cases where the true beneficiary of a legal person cannot be identified, in accordance with Section 18, Paragraph seven of the Law, the entities specified in Article 3 of the Law (e.g. credit institutions, outsourcing accountants, sworn notars, etc.) may consider as the true beneficiary of the legal person the person who holds senior management in that legal person. the office of the institution. Accordingly, in cases where information is recorded in the Enterprise Register that it is not possible to identify the true beneficiary, in accordance with the Law, in order to allow entities identified in Article 3 of the Law to carry out customer research activities, the legal person, as the true beneficiary, will have to indicate one, several or all members of the Management Board when completing customer survey questionnaires, taking into account: an assessment of the subject of the Law on the essential circumstances.
It should be noted that if the only member or shareholder of a capital company is a legal person in which it is not possible to identify the true beneficiaries, it is nevertheless possible to identify the true beneficiary in the capital company itself. In particular, unless there are specific internal conditions regarding decision-making, the party/shareholder concerned controls the decision-making of the capital company concerned and should therefore be regarded as the true beneficiaries of the capital company concerned.
Identification of true beneficiaries
According to the Law 18. The procedure laid down in Article 1 for a natural person, if he or she has reason to believe that he or she has become the true beneficiary of a capital company, has an obligation to notify the capital company of that fact. Similarly, shareholders or shareholders of a capital company, if they act on behalf of another person, shall be obliged to disclose it to the board of the capital company. The management board of a capital company shall be obliged, on a reasonable basis, to ascertain whether the capital company is not the true beneficiaries, as well as whether the information received (cleared) regarding the true beneficiaries is true.
Under 18 of the Law. The fourth paragraph of Article 1 and 18. The first paragraph of Article 2 shall submit to the Enterprise Register an application for registration of information regarding the true beneficiaries without delay, but not later than within a period of 14 days from the date of the relevant information.
It shall be indicated that according to 18 of the Law. For the first sentence of Section 2, Paragraph two, when submitting an application to the Enterprise Register regarding the registration (establishment) of a capital company or changes of members of a capital company or members of the board of directors, the application shall include mandatory information regarding the true beneficiaries of a capital company in accordance with the Law 18. The requirements of Article 2.
In the light of the above:
- in the case of the registration of a new capital company, the application for registration must also include information on the true beneficiaries;
- the capital company shall submit an application to the Enterprise Register for the registration of information on the true beneficiaries or on the date of disclosure of the relevant information without delay, but not later than within 14 days from the date of the information regarding the true beneficiaries or the date of disclosure of the relevant information.
Information to be submitted
Information to be stored in the capital company regarding the true beneficiaries shall be specified in the Law 18. In the fourth paragraph of Article 1. According to the Law 18. Section 2, first paragraph, Law 18. The information referred to in the fourth paragraph of Article 1 shall also be submitted to the Enterprise Register.
Upon request of the Enterprise Register of the Republic of Latvia, in order to enable it to ascertain the reliability of the information submitted, the capital company shall submit:
- the documentary justification for the control carried out;
- a document confirming the relevance of the information identifiable to the true beneficiaries:
- a notarised copy of the identity document;
- a statement of the foreign population register.;
- other documents equivalent to those documents.;
- a document supporting proof that the true beneficiary cannot be identified.
It shall be indicated that in accordance with the Law 18. The information provided for in the fourth paragraph of Article 1 concerning the true beneficiaries (including the documentary justification for the control carried out) must also be kept by the legal person himself or herself.
The following information shall be recorded regarding the true beneficiaries of capital companies in the registers carried by the Enterprise Register:
- the personal identity number (if any - date of birth, month, year, number and date of issue of the identity document, country and authority which issued the document);
- the country of residence;
- way of exercising control over a capital company:
- through the status of the legal person (if THE PLG is the direct owner or directly controls the legal person):
- as a member;
- as a shareholder.;
- as a separate person controlling (if the true beneficiary is an indirect owner or indirectly controls a capital company):
- on the basis of a contract of authorisation;
- on the basis of ownership (for example, if the true beneficiary is the owner of a shareholder of a capital company or a shareholder, a legal person);
- through the legal arrangement as a founder;
- through the legal arrangement as a principal;
- through the legal arrangement as a manager;
- on the basis of the transaction relationship.;
- another (a free text field with the option to type an undefined type).;
- information on the person through whom the control is exercised (specify if any of the types referred to in Sub-paragraphs 6.2 or 6.3 in which control is exercised in a capital company is indicated):
- the name, surname, personal identity number of the natural person (if the person does not have a personal identity number - date of birth, month and year);
- the name, registration number and legal address of the legal person (may also be a foreign legal person).
It must be noted that the threshold of more than 25% laid down in Article 1 (5) (a) of the Law, if the shares belong to a natural person, is the minimum threshold from which the actual determination of the beneficiary is mandatory, namely that when a natural person holds a participation of such an amount, there cannot be a claim that the true beneficiary cannot be established or that the person concerned not the true beneficiary. An exception is possible if the natural person concerned is controlled by another person or there is another type of control (such as an agreement on the division of control) between the members (shareholders). In the light of this, in cases where several members (shareholders) in a capital company comply with the above-mentioned definition of the true beneficiary, it is not possible to have only one of the (shareholders) exercise control over a capital company through the status of a legal person, as a member or as a shareholder. In such situations, there should also be another form of control exercise to be indicated in the application for registration of the true beneficiary, including information on the person through whom the control is exercised.
Under 18 of the Law. The second sentence of the second paragraph of Article 2, where a capital company has used all possible means of clarification and has concluded that it is impossible to identify any natural person, THE PLG, as well as doubts that the capital company has the true beneficiary, must certify it in the application, specifying the grounds. In this case, it will be registered in the Commercial Register that it is not possible to identify the true beneficiary.