France: Required reporting, ultimate beneficial owners | KPMG | GLOBAL

France: New measures require the reporting of “ultimate beneficial owners”

France: Required reporting, ultimate beneficial owners

An ordinance in France transposes and implements an EU anti-money laundering directive into French domestic law, and requires the registration of “ultimate beneficial owners” by 1 August 2017.

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Ordinance no. 2016-1635 (1 December 2016) implements provisions of the EU fourth anti-money laundering directive (EU Directive 2015/849, 20 May 2015) into French domestic law with goals of strengthening French anti-money laundering legislation and addressing the financing of terrorism. Under the French provisions, French and foreign companies and corporate groups must identify and register their “ultimate beneficial owners” by 1 August 2017. Those ultimate beneficial owners that are already registered with the companies and commercial registry as of 1 August 2017, must file information about their ultimate beneficial owners by 1 April 2018. 

The new government of France on 12 June 2017 released a decree that clarifies the scope of this new registration obligation. The following provides a summary of the requirements under the new measures.

Companies or entities subject to the new registration obligation

  • Companies and economic interest groupings with their “registered seat” in France
  • Foreign commercial companies with a branch in France
  • Other legal entities that are required to register under legislation or regulations (new Article L.561-46 § 1 of the French Monetary and Financial Code)

Companies listed on a regulated market in France (EURONEXT) or in another EU Member State that is a party to the European Economic Area agreement or in a country imposing similar requirements (e.g., stock exchanges such as the NYSE, LSE) will not be subject to this requirement. 

Definition of “beneficial owner” (defined by French anti-laundering regulations)

The definition of “beneficial owner” (which is already present in French law under Art L.561-2-2 of the French Monetary and Financial Code) means one or several individuals who ultimately own or control the company or the corporate group or on whose behalf a transaction or an operation is conducted.

An individual is considered as owning or controlling the company or the group when that person ultimately holds, directly or indirectly, at least 25% of the share capital or voting rights of the subject company or corporate group (or exercises, by any other means, the authority to control certain functions including corporate management and governance, or control of executive bodies of the company, or control over its shareholders’ meeting).

Practical aspects of the new requirement

Entities subject to the new rules are required to obtain and keep accurate and up-to-date information on their “beneficial owner(s).” This information must be provided to the companies and commercial registry upon their registration, then regularly provide updates (within 30 days following the situation or the event that changes the content of the information filed with the commercial court).

Clarifying decree

The decree issued by the government on 12 June 2017 defines certain items such as information about the list of collected information—for instance, the terms and conditions according to which such information is obtained, kept, updated, and communicated to the commercial and companies’ registry. The registry’s clerk must verify the information relating to the actual beneficiaries and must acknowledge receipt thereof pursuant to conditions listed in the decree. This information will be kept by the national companies and commercial registry. The 12 June decree specifies who can have access to this information—for instance, authorities that are involved in addressing money laundering, terrorism financing, bribery, and tax evasion; and judicial or administrative authorities named specifically; and persons authorized by a court decision.

Penalty regime

  • The head (president) of the commercial court will be able to issue a summons to any company or entity and mandate filing of the required information, and has the authority to impose periodic penalties for noncompliance.
  • Individuals (managers, directors, etc.) who do not file the “ultimate beneficial owner” information as required or who file inaccurate or incomplete information can be subject to criminal sanctions including a sentence of six months in prison and a €7,500 fine together with a management ban. The criminal liability of the concerned legal entity can also be sought.

KPMG observation

Company officers need to be aware of the due dates under these new measures. Companies (including subsidiaries of multinational groups) and French branches of foreign companies that will be incorporated after 1 August 2017 must declare their “ultimate beneficial owners” at the time of their incorporation, whereas those already incorporated as of 1 August 2017 will have to comply with this requirement by 1 April 2018. 

 

For more information, contact a tax professional with Fidal* in France or with KPMG’s International Tax Team in the United States:

Gilles Galinier-Warrain | +33 1 55 68 16 54 | gilles.galinier-warrain@fidal.com 

Olivier Ferrari | +33 1 55 68 18 14 | olivier.ferrari@fidal.com

Patrick Seroin | +1 (212) 954-2523 | patrickseroin@kpmg.com   

* Fidal is a French law firm that is independent from KPMG and its member firms.

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