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New obligation for companies under the Law on the Prevention of Money Laundering and Terrorist Financing

  • Lithuania
  • Other

2018-11-13

The Law on Prevention of Money Laundering and Terrorist Financing has been substantially reviewed and amended while implementing in Lithuania the Directive (EU) 2015/849 of the European Parliament and of the Council on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing. Amendments have substantially expanded the circle of persons, subject to obligations under this law as well as expanded and regulated in more detail the contents of these obligations. While majority of the provisions of this law came into force immediately after its adoption in July 2017, some of them will only become applicable in the nearest future.

As of 1 January 2019 an obligation for all legal persons established in the Republic of Lithuania to obtain, update and store accurate information on their beneficial owners and submit such information not later than within ten days from the date of change in the data to the manager of the Information System of Participants of Legal Entities (JADIS) comes into force. Companies shall start collecting such data about their beneficial owners as of 1 January 2019 and within 10 days shall submit this data to the manager of JADIS.

The new version of the Law on Prevention of Money Laundering and Terrorist Financing has also expanded the concept of beneficial owners. The natural person who is the owner of the company or controls the company shall be regarded as the beneficial owner of the company. Shareholders with 100% share package are not the only ones regarded as owners of the company. The law uses a notion of “sufficient percentage of the shares” and at the same time it is recognized that shareholders with a shareholding of at least 25% plus one share or an ownership interest of more than 25% in the company satisfy this requirement. The number of shares the person holds is calculated by including not only the shares held by the right of ownership, but also those shares the voting rights of which are transferred to that person as well as bearer shares the management of which is handed over to that person.

This provision does not apply to public companies the securities of which are traded on European Union regulated markets. If their securities are traded in other markets, this exemption only applies after it is established that information disclosure requirements in accordance with the legal acts of the European Union or equivalent international standards are applied in those markets.

Identification of the beneficial owner requires finding a natural person behind the corporate structure. This search is not limited to one level. When the shareholder with 25% plus one share is another legal person, then the natural person controlling the latter is recognized as indirect owner of the former. In other words, the natural person can be recognized as beneficial owner not only in the company the shares of which he holds (first level company), but also in the companies, the shares of which are held by the first level company.

Besides the shareholders mentioned above, also the natural person who although does not hold a sufficient percentage of shares, but otherwise controls the company may be recognized as the beneficial owner.

Finally, if after these stages of identification no beneficial owner could be found, the natural person who holds the position of senior managing official in that company shall be recognized as the beneficial owner.

After identification of the beneficial owners, the company must collect about them the following information:

-  Name and surname of the beneficial owner;

-  Date of birth, personal number, the state which issued the identity document;

-  Place of residence of the beneficial owner;

-  Ownership rights held by the beneficial owner and their scope (the number of shares expressed as a percentage and the number of voting rights expressed as a percentage);

-  Other rights of control held by the beneficial owner (the chair of the board, board member, director, senior manager, other position and the number of transferred voting rights expressed as a percentage).

In the event of changes to this information, this information shall be regularly updated. The law requires that within 10 days after changes in any of this data the renewed information is submitted to the manager of JADIS.

How we can help you:

-  Help identify the beneficial owners of your company;

-  Draft beneficial owners’ registration documents/ journals;

-  Submit information about beneficial owners, changes to this information to the manager of the Information System of Participants of Legal Entities (JADIS);

-  Advise on related legal matters, including communication with beneficial owners, evaluation of voting and other control rights held by the person, the principles of identification of beneficial owner in case of complicated corporate structures, etc.

For more information contact

Rimtis Puišys, Partner

Disclaimer

This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

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