Member Article

1. Introduction

The Act imposes an obligation on companies and other legal entities to obtain information about the company’s beneficial owners. The purpose of the Act is to improve access to information about ownership and control in Norwegian companies, and to be a tool in the fight against money laundering, terrorist financing and other financial crime.

The parties subject to the Act are referred to in the Act as «obliged entities». From the time the Act came into force until today, obliged entities have only had a duty to identify and obtain information about any beneficial owners. So far, there has been no requirement to register such information in a register. On 17 June 2024, the Norwegian Parliament adopted an amendment to the Act that makes it possible to establish a register of beneficial owners, and from 1 October 2024, such a register will be established and administered by the Norwegian Business Register (Norw.: Brønnøysundregistrene). There will be a phase-in period from 1 October 2024 until 31 July 2025, where obliged entities can voluntarily register information about the company’s beneficial owners. From 31 July 2025, there will be an obligation to register the company’s beneficial owners for all obliged entities, and failure to comply with the regulations will be sanctioned with fines or in particularly severe cases, with imprisonment.

The regulations relating to the registration of beneficial owners are basically based on the Act, but with supplementary rules in associated regulations. There is a relatively large amount of material to comprehend, and the material can be perceived as somewhat complex. In this article, we have tried to present the regulations in a clear and concise manner, but it can often be an advantage to contact a lawyer in specific cases as it is a new set of rules with many details.

2. Who is subject to the Act

2.1 Legal entities

In principle, the Act applies to all legal persons (including private limited liability companies (AS),  public limited liability companies (ASA) and partnerships (ANS, DA and KS)), entities and other associations that conduct business or are registered in Norway, including on Jan Mayen and Svalbard.

Certain exceptions to this principle are set out in the regulations to the Act, and the most practical exceptions to the Act are:

• Associations that are neither commercial associations nor associations with an accounting obligation
• Foundations
• Securities fund
• Listed companies, with the exception of companies listed on Euronext Growth (regulated markets only)
• Norwegian foreign enterprises (: NUF)

The Norw. Business Register has already created a function in which companies can investigate whether they are obliged entities and subject to the rules of the Act (provided that the company has a Norwegian reg. no.): Check if you have to register beneficial owners – The Brønnøysund Register Centre (brreg.no).

2.2 Foreign trusts

In addition, the Act applies to trustees of foreign trusts and similar legal arrangements that conduct business in Norway, regardless of whether the trustees or the legal arrangements are subject to registration in the Norwegian Business Register. Trustees are considered to conduct business in Norway when, in the name of the trust or legal arrangement, they 1) are subject to customer measures by a reporting entity in Norway pursuant to the Norwegian Money Laundering Act, or 2) acquire real property in Norway.

3. Who is the beneficial owner

3.1 Definition

According to the Act, a beneficial owner is defined as «the natural person(s) who ultimately owns or controls a legal person, arrangement, entity or other association». This is a relatively general and somewhat imprecise description but is further defined in the regulations.

In the regulations, a distinction is made between whether the obliged entity is a foundation or a manager of a foreign trust, and other legal entities with regard to the definition of a beneficial owner. This distinction also applies in relation to what information must be obtained and registered about beneficial owners. In the following, the article will only focus on the rules that apply to obliged entities that are not a foundation or a trustee of a foreign trust (i.e. other legal entities), as this is most practical.

In relation to legal entities that are not a foundation or a trustee of a foreign trust, a beneficial owner is defined as a natural person who meets one or more of the following criteria:

• Directly or indirectly owns more than 25 percent of the shares in the obliged entity.
• Directly or indirectly vote for more than 25 percent of the voting rights in the obliged entity, in cases where the distribution of voting rights deviates from the ownership shares.
• Directly or indirectly appoint or dismiss more than half of the legal entity’s or association’s board members or equivalent.
• In any other way than specified in 1) to 4) exercises control over the obliged entity.

Please note that a person is considered to indirectly own more than 25% of the obliged company if he or she owns more than 50% of the intermediate companies. This means, for example, that a person D who controls 50% or more in company C, which in turn controls 50% or more in company B, which in turn controls 25.01% or more in company A, will be considered a beneficial owner in company A.

3.2 Identification of beneficial owners

In order to identify any beneficial owners, the obliged entity must obtain information from e.g. the memorandum of association, the articles of association, shareholders’ register or similar documents. In addition, beneficial owners themselves, and anyone who is reasonably believed to have information of importance for the identification of beneficial owners, have a duty of disclosure to the obliged entity.

The assessments made by the obliged entitys in connection with the identification of beneficial owners must be justified and documented, and applies in any case of the following cases:

• One or more beneficial owners are identified.
• The obliged entities believes that one or more beneficial owners exist but cannot identify them.
• No beneficial owners are identified.

In addition to information about the basis for the identification, or lack of identification, of beneficial owners, the obliged entity must also document the position of the beneficial owner (direct or indirect ownership).

The obliged entity must remember to notify the person(s) identified as beneficial owners that the information obtained about them will be registered. This is natural to do in connection with obtaining the information.

4. What information shall be registered in the register

When the obliged entity has identified a beneficial owner, the following information about the beneficial owner must be registered in the register:

• Name
• Norwegian social security number or D number (or date of birth where neither is available)
• Country of residence
• Citizenship
• The basis for identifying a person as a beneficial owner, or the lack of such identification (as described in section 3.2 above), as well as the position they hold
  • If a beneficial owner holds the position indirectly, the entire company chain between the obliged entity and the beneficial owner must be registered.
  • If a beneficial owner has not been identified, information about the obliged entity’s CEO and board members, or persons in similar positions, must be registered instead.

The first initial registration in the register must take place no later than 14 days after the obliged entity has been registered in a public register (typically the Norw. Business Register). The same deadline applies if the obliged entity identifies changes in beneficial owners.

The information listed above must also be stored by the obliged entity for 10 years after a person cease to be beneficial owners. If an obliged entity ceases to exist, the board of directors or similar body shall ensure that all information about beneficial owners is stored for five years after the obliged entity ceases to exist.

5. Access to information about beneficial owners

As a general rule, information about beneficial owners shall only be available to:

• Persons subject to reporting requirements under section 2(c) of the Norwegian Money Laundering Act in connection with their customer measures and ongoing follow-up under the Money Laundering Act
• Public authorities
• Media
• Civil society organizations
• Higher education institutions

However, the Norwegian Ministry of Finance is authorized to grant other natural or legal persons access to registered information in regulations to the Act.

Regarding the relationship between the register of beneficial owners and shareholders’ registers, and part of the background to establishing such a register, the Act’s preparatory works state that «no register of beneficial owners has been established in Norway today. In practice, a large amount of information about beneficial owners is available to public authorities, and to some extent also to the general public, through a combination of different mechanisms and information sources. Examples include information about shareholders in annual accounts, incorporation documents and as part of tax reporting.»

The identity of a company’s shareholders will still be available through the annual accounts and the Norwegian Tax Administration’s shareholder register. However, an overview of a company’s shareholders will only provide answers to who is the company’s direct shareholder and not who ultimately owns the company (the beneficial owner(s)).

6. Sanctions for failure to register and update the register

In the event of non-compliance with the registration obligation, the Norwegian Business Register (as registrar) can issue an order to the obliged entities to comply within a specific deadline. If the deadline is not met, a coercive fine may be imposed until the obliged entities complies with the order. If the registration of beneficial owners is not carried out after eight weeks with a penalty fine directed at the party obliged to register, an order for registration and a decision on a coercive fine may be imposed on, inter alia the following persons who will be jointly and severally liable for the coercive fine:

• board members
• managing directors/general manager
• general partner

The rules on coercive fines will only come into effect from 1^st of August 2025.

In extreme cases, an obliged entity, and persons acting on behalf of such obliged entity, who intentionally fail to obtain, store or register information, or register incorrect information, may be punished with fines or imprisonment for up to one year.

The nature of the sanctions that can be imposed on obliged entities for non-compliance with the regulations, emphasizes the importance of obliged entities actually obtaining and registering the required information about beneficial owners in the register.

7. The relationship to the Norwegian Money Laundering Act

It is easy to confuse the terms «subject to registration» under the Norw. Act on the Register of Beneficial Owners and «subject to reporting» under the Norw. Money Laundering Act. It is important that companies distinguish between these roles, given that they are subject to both regulations. In cases where a company is both subject to registration under the Norw. Act on the Register of Beneficial Owners and subject to reporting under the Norw. Money Laundering Act, the company must be aware that the term «beneficial owner», which is used in both regulations, has different definitions with different criteria for when a person is considered to be a beneficial owner. Information about beneficial owners under the Norw. Beneficial Ownership Register Act is therefore not necessarily consistent with the information about beneficial owners that a company provides in any customer checks under the Norw. Money Laundering Act.

The Norw. Business Register has made a short summary of the differences and similarities in the definition of beneficial owner in the Norw. Act on the Register of Beneficial Owners and the Norw. Money Laundering Act: Two laws – two almost identical sets of criteria – The Brønnøysund Register Centre (brreg.no).

8. What should Norwegian companies do to comply with the new rules in the Norw. Beneficial Ownership Act?

Since 1 November 2021, there has been an obligation for obliged entities to obtain information about and keep documentation on beneficial owners, as mentioned in the introduction. If obliged entities have not complied with these requirements so far, it is important that this work is initiated as soon as possible in order to be able to comply with the regulations when the registration obligation enters into force on 31 July 2025.

We have created a checklist for obliged entities of what mechanisms should be in place to ensure compliance with the Norw. Beneficial Ownership Act, and to be prepared when the registration obligation comes into force on 31 July 2025:

• Establish or ensure that the company has routines for identifying and obtaining information about beneficial owners
• Establish or ensure that the company has systems for storing information about beneficial owners, as well as the documentation of the identification of beneficial owners (which also takes into account rules on GDPR)
• Establish or ensure that the company has routines to continuously identify any changes in the information about beneficial owners (changes in already registered beneficial owners or identification of new beneficial owners)
• Be aware that there are different rules and criteria that apply to the registration of and reporting on beneficial owners under the Norw. Act on the Register of Beneficial Owners and the Norw. Money Laundering Act.

 

This article was first published in Revisjon og Regnskap, 25 October 2024.

The post Register of beneficial owners appeared first on Simonsen Vogt Wiig.

 

Link to article