Authors: Maria DeBono, Associate and Sarah Grima, Associate

These FAQs are the first part of a two-part series regarding Subsidiary Legislation 386.19, entitled the Companies Act (Register of Beneficial Owners) Regulations (the “BO Regulations”). By virtue of these FAQs, we aim to provide the reader with an understanding of who may be considered to be the “beneficial owner” (“BO”) of a company, as well as highlight the obligations and far-reaching implications concerning beneficial ownership under Maltese Law.

Part 2 of the FAQs may be accessed via https://fenechlaw.com/beneficial-ownership-part-2-of-2/

Who is a Beneficial Owner (“BO”)?

The BO Regulations make reference to the Prevention of Money Laundering and Funding of Terrorism Regulations (“PMFLTR”) in defining the “beneficial owner” (“BO”). The BO is defined as any natural person or persons who ultimately own(s) or control(s) the company, or on whose behalf a transaction or activity is being conducted. The BO must therefore always be a natural person.

What is “ownership” and “control”?

In the case of a company, the BO shall consist of any natural person or persons who ultimately own(s) or control(s) that entity either through direct or indirect ownership or through control via other means.

What is direct and indirect ownership?

To verify whether a natural person can be considered a BO through direct or indirect ownership, there is a percentage test, namely the holding of:

  • shares in an amount of 25% + 1 or more; or
  • more than 25% of the voting rights; or
  • more than 25% ownership interest

in that body corporate or body of persons (including through bearer shareholdings).

When these thresholds are met and held directly by a natural person, this is considered to be direct ownership. However, when met and held by one or more companies, by a body of persons, through a trust or a similar legal arrangement or through a combination of these structures, which fall under the control of the same natural person(s), this is considered to be indirect ownership.

What is control via other means?

The percentage test is not the sole method used to determine who the BO is. One must also consider control via other means. Control via other means occurs when no natural person is identified as a BO in terms of the PMLFTR, or when a natural person is identified but the subject person, such as auditors, legal professionals, banks or other financial institutions, is aware or has reason to believe that another person(s) is also exercising ultimate control over the operations of a company or its management, via other means. An example of control via other means could be when persons are granted rights through some form of agreement, such as a shareholders’ agreement, by means of which such persons are able to influence the company’s management, operations or decision-making as specified in the Malta Business Registry’s (“MBR”) Guidance on the Register of Beneficial Owners of Commercial Partnerships.

Notably, such person should be considered a BO in addition to any natural person holding shares in the company.

What if no natural person or persons who ultimately own(s) or control(s) that entity, either through direct or indirect ownership or through control via other means, can be identified?

If, after having exhausted all possible means to identify the natural person or persons who ultimately own(s) or control(s) that entity either through direct or indirect ownership or through control via other means and provided there are no grounds of suspicion, no natural person has been identified, subject persons, shall consider the natural person or persons who hold the position of Senior Managing Official (“SMO”) of the company, to be the BO(s) of the company.

The Implementing Procedures provide some guidance on who may be considered an SMO, including but not limited to, a company’s director,  a company’s Chief Executive Officer, Chief Financial Officer or other similar official who exercises significant control over the company through the decision-making powers concerning the daily affairs of an entity or who affects the general direction or business operations of a company.

Notably, the obligation to identify the SMO(s) as the BO(s) is not intended to be the default mechanism but is only triggered whenever an entity cannot identify any natural person who owns or control the company either directly or indirectly or through other means as a BO.

Are there any exemptions in terms of the Regulations?

Yes, the Regulations provide for two exemptions, namely:

  • Companies that are directly and solely owned by natural persons (i.e no body corporate is also a shareholder at any time); and
  • Companies that are listed on a regulated market which are subject to disclosure requirements consistent with EU law or equivalent international standards which ensure adequate transparency of ownership information.

Part 2 of these FAQs will delve into the duties of Maltese companies in terms of the BO Regulations and provide some practical information to ensure compliance with same.

Should you require any further information or assistance on the matter, please do not hesitate to reach out to us personally on sarah.grima@fenechlaw.com and maria.debono@fenechlaw.com.

©Fenech & Fenech Advocates 2021

Disclaimer │ The information provided on this Update does not, and is not intended to, constitute legal advice. All information, content, and materials available are for general informational purposes only.  This Update may not constitute the most up-to-date legal or other information and you are advised to seek updated advice.