The EU and Denmark wants to know who really controls your company

In the ongoing battle against financial crime, in 2020, Denmark changed the Danish company law (Selskabsloven) based on EU regulation with more specific requirements for companies to identify, disclose, and document Beneficial Owners.

On top of the new requirements, the Business Authority’s ability to punish or even terminate companies will be strengthened.

Why was this such an important and critical change? And on a practical level, how does it affect your organization, and what do you need to do to comply?
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This affects all EU countries and not just Denmark‍

This new regulation in Denmark is based on the EU 5th AML directive - so this is not only relevant to Danish companies. Similar regulations have been or will be implemented in all EU countries, and it's important to understand the nuances.
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Why this change in regulation?‍

Money launderers love to use a series of shell companies to hide the real people behind cash flows. The regulation changes will be an extra layer to strengthen the fight against Financial Crime by ensuring more transparency of who actually owns and control companies.

The changes set minimum standards for all companies and also set requirements for companies to share information about Beneficial Owners with the authorities.

We see an ongoing change to regulation to strengthen the fight against financial crime, and we will expect to see this trend continue going forward. Not just banks and other financial institutions are legally required to fight financial crime; companies are also increasingly being held responsible.

Most people will agree that this sort of transparency is a social good, but some corporate treasurers may throw up their hands at having to deal with yet another disclosure obligation. However, everybody should remember that this is not about being compliant; the end goal is to fight financial crime.
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Six key requirements in the Danish company law §58a

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‍1. Companies are legally obligated to collect information from beneficial owners (UBOs). The obligation includes owner voting rights.

2. Owners of a company must provide the company with relevant information that will allow the company to determine the level of ownership and control that the person holds over the company.

3. Companies are legally obligated to register beneficial owners in the public business register immediately after a company has become aware of a new beneficial owner. If there are no beneficial owners, then the senior management (the registered management - §10,1) will be seen as beneficial owners.

4. At a minimum, companies are legally obligated to check at least once a year to see if there are changes to the registered beneficial owners. The result must be documented and presented for the body (normally the yearly general assembly) that approves the company’s annual report.

5. Companies are legally obligated to store information and documentation collected from Beneficial Owners for five years after cessation of ownership.

6. Companies are legally obligated to share information of the beneficial owners with relevant authorities on request.

The changes mean more work for companies, but it also gives companies a useful tool in that it adds legal requirements that Beneficial Owners provide information when companies request them.
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How do I prepare for this? What do I need?‍

Companies are already obligated to register all UBO information in the official business registry - best known in Denmark as cvr.dk - as soon as the company becomes aware of it.

As a minimum, companies in Denmark (there are some smaller differences between countries) should collect the following information from their Beneficial Owners:

Domestic Beneficial Owners:
- Full name
- CPR number
- Owner % (direct, indirect, and total)
- Voting right % (direct, indirect, and total)
- Other rights (such as the right to veto - the reason for “self-identified UBO”)
- UBO start date

Foreign Beneficial Owners:
- Full name
- Address
- Country
- Personal ID number (passport number or National ID card number)
- Owner % (direct, indirect, and total)
- Voting right % (direct, indirect, and total)
- Other rights (such as the right to veto - the reason for “self-identified UBO”)
- UBO start date
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What do I do with all this UBO information?

‍UBO information must also be available to share with authorities if requested.

And under paragraph 58c, which is also new, companies must be able to disclose their UBO information to third parties undergoing a Know Your Customer (KYC) process.
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What if I can't get the information from the UBO?

‍If companies do not receive the required information from a Beneficial Owner, it has to document that it has made reasonable attempts to get the information. This process must be documented for a minimum of five years.
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What tool can help me with all this documentation and compliance to this regulation?

‍The Avallone platform automatically identifies who has significant ownership or control percentage to constitute a UBO. Knowing who is considered to be a UBO, it's easy to request the required information and documentation from the UBOs and other company officers via the platform.

Once all the data is collected into Avallone, it's easy comply with the requirements for storing data, which must be kept for a minimum of five years after the UBO has ceased ownership - without jeopardizing the requirements of data privacy and GDPR.

Even better, Avallone creates the documentation flow - so the information is easily ready for the next annual meeting and annual report.

Contact us for a demo to see how effortless it can be to meet all of these requirements.