On 2 May 2019, the Danish Parliament passed a bill amending the Danish Companies Act. The bill is a consequence of the 5th Anti-Money Laundering Directive (“AMLD5”), which must be implemented in Danish law by 10 January 2020.
In this post, I review the principal changes concerning beneficial owners arising from the law.
On request, owners are required to provide the company with necessary information
Any person who, directly or indirectly, owns or controls the company, is obliged to provide the company with information about the ownership structure which allows the company to identify the beneficial owners. However, this is not a general duty to disclose, but a duty which must be fulfilled when the company requests the information.
This duty to disclose is not covered by the so-called penalty provision in the Danish Companies Act, which means that there are no consequences for people who fail to provide the company with information about the ownership structure.
The company has a duty to review and update the registration of beneficial owners at the annual general meeting
As something new, companies must review whether there are changes to the registration of beneficial owners at least annually. The results of the review must be presented at the annual general meeting. This provision entails that, in practice, the review will be discussed and presented at the annual general meeting, where the annual report is approved.
In cases with frequent changes in ownership, it may be necessary for the company to perform this review several times a year.
For companies using the calendar year as their financial year, the obligation will take effect in the 2020 financial year. This means that the first presentation of a review will take place at the annual general meeting in the spring of 2021, when the annual report for 2020 is approved. At that time, this item should appear in the notice of the annual general meeting and in the corresponding minutes.
This obligation is not subject to penalties under the rules of the Danish Companies Act either.
The company has a duty to provide companies with “know your customer” (KYC) procedures
As indicated above, the law is a result of the implementation of the AMLD5. In this context, the company is subject to a duty to provide companies covered by the Danish Anti-Money Laundering Act with information about the company's control and ownership structure. Among other things, companies covered by the Danish Anti-Money Laundering Act are required to conduct KYCprocedures, which include clarifying their customers’ control and ownership structure.
Therefore, it now appears directly in the Danish Companies Act that the company is required to provide these companies with the information, if it is requested of them.
Alongside this duty, The Danish Business Authority conducts a review of the report if it appears that the company has an inadequate registration of ownership. This is because the companies covered by the Danish Anti-Money Laundering Act are obliged to report any discrepancies if the ownership structure differs from what is registered in the Central Business Register (the CVR register).
Risk of winding up order in case of lacking or incomplete registration or storage
Previously, the Danish Business Authority had the right to send companies a winding up order if they failed to register beneficial owners. Under the new law, this power has been extended, as in the future the Danish Business Authority also has the capacity to issue a winding up order if the company has incomplete or incorrect registration. Please note that winding up orders can also be issued if the company has not complied with the storage obligation. Since the introduction of the registry of beneficial owners, companies have been required to keep documentation of their own registration of beneficial owners, as well as documentation of the measures taken to identify and register the beneficial owners.
Due to proportionality, winding up orders are instruments of the Danish Business Authority. In practice, the Danish Business Authority will first contact the company with a demand to correct the registration so that it meets the requirements.
The above shall enter into force on 10 January 2020. However, the Danish Business Authority's right to issue a winding up order to a company due to missing or incomplete registration of beneficial owners or storage of documentation came into force on 1 July 2019.
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