The newly passed Measures Against Money Laundering Act1 (MAMLA) was promulgated in issue 27 of the State Gazette, dated March 27, 2018. The new law transposes the requirements of Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing2, its main goal being the achievement of greater efficiency in preventing the use of the financial system for money laundering purposes – through providing for various measures, such as: customer due diligence, collecting, drawing up and keeping documents and other information, disclosure of information about suspicious operations, transactions and clients, etc.
The new law takes into account the need for accurate and up-to-date information on the beneficial owners as a key factor in tracing criminals who might otherwise hide their identity behind a corporate structure. Namely the beneficial owners are those to be covered in the further content of this article – with focus on the obligation of the companies to take action to declare their beneficial owners in the Commercial Register.
Legal definition of the term “beneficial owner” is given in § 2 of the Supplementary Provisions of the MAMLA – it is very detailed (also in respect of the terms “direct ownership”, “indirect ownership”, “control”, etc.), thus ensuring more clarity in the process of interpretation and facilitating the application of the provisions. For more details on the definition, please refer to its full text available through the link to the website of the State Gazette (to be found in the footnotes to this article).
Identifying the beneficial owners and verifying their identity is provided for as part of the customer due diligence process and is governed by Chapter Two, Section VI of the MAMLA.
Among the main changes to the applicable up until now regulation on identifying the beneficial owners and verifying their identity is explicitly providing for an obligation for all legal entities and their contact persons incorporated within the territory of Bulgaria to obtain, hold and provide adequate, accurate and current information on their beneficial ownership, including the details of the beneficial interests held. The provision of the new Art. 65a of the Commerce Act is also in this sense – in terms of commercial companies.
The new law provides for all information and data about the beneficial owners to be entered in the files of the legal entities incorporated within the territory of Bulgaria – the entries in terms of the companies are to be made in the Commercial Register pursuant to the procedural rules and terms of the Act on the Commercial Register and the Non-Profit Legal Entities Register.
The following data is subject to entry:
Identification data about the beneficial owners – natural persons, including: names, citizenship, uniform citizen number, date of birth (if UCN/EGN is not available), country of residence (if different from Bulgaria or the country of citizenship);
Data about the legal entities or other legal arrangements through which directly or indirectly control is exercised, including: company name, number in a national register, legal form according to the national legislation, central office and management address and identification data about the representatives;
Identification data of a contact natural person permanently residing on the territory of Bulgaria – where in the file no data has been entered for a permanently residing on the territory of Bulgaria legal representative.
Entry of data is carried out on the basis of a declaration (Declaration under Art. 63, par. 4 of the Measures Against Money Laundering Act) whose form and contents are determined by the Rules on the implementation of the MAMLA – the declaration is in a standard form as per Attachment No. 3 to Art. 38 of the said Rules. Requesting the respective circumstances for entry in the Commercial Register is done by using a standard form application B7 (Application form for registration of circumstances pertaining to beneficial owners)3. The contact person to be entered (when applicable) should provide his notarized consent to that end.
The answer to the following question is of very important practical significance: are all companies under the obligation to declare their beneficial owners?
No, not all companies are obligated to declare their beneficial owners – such conclusion follows from the exception4 provided for in Art. 63, par. 5 of the MAMLA. According to the said exception the legal entities incorporated within the territory of Bulgaria, except for Sole Proprietors, are under the obligation to request for entry their beneficial owners, unless the latter have already been entered in their files as shareholders or sole capital owners; when legal entities have been entered in the files as shareholders or sole capital owners, the obligation arises: 1. if the beneficial owners have not been entered as shareholders and/or sole capital owners in the files of incorporated within the territory of Bulgaria legal entities participating in the chain of ownership, or 2. if such legal entities are not incorporated within the territory of Bulgaria.
The above means that in practice the obligation to declare beneficial owners in the Commercial Register will arise mainly to companies which are joint-stock companies or which are owned (directly or indirectly) by joint-stock companies or by foreign legal entities.
What is the deadline for declaring the beneficial owners?
Pursuant to § 9 of the Transitional and Final Provisions of the MAMLA, the Registry Agency shall provide possibility for entry of the data about the beneficial owners of the companies in the Commercial Register by January 31, 20195 – not later than 4 months from the expiration of that term the companies required to file for data entry should submit the respective application.
The obligation to declare beneficial owners should continue to be fulfilled after the expiration of the above specified term – by companies for which the respective prerequisites occur at a certain later point (for example, when admitting a foreign legal entity as a new shareholder in a procedure for increasing the capital of an LLC or upon transformation by change of the legal form of an LLC into a JSCo. – where such procedures are completed after the expiration of the above specified deadline).
Any change to already registered circumstances about the beneficial owners should also be requested for entry.
1 See the text of the newly passed law on the website of the State Gazette
2 The requirements of Directive (EU) 2015/849 have been transposed through other laws as well – for more information, please read News article The possibility of issuing bearer stocks will no longer be available.
3 The same standard form application is used for requesting entry of circumstances under other laws as well – for more information, please read News article Offshore companies subject to legal regulation.
4 The article has been updated on 13.05.2019 in connection with an amendment to Art. 63, par. 5 of the MAMLA (effective as of 07.05.2019).
5 The article has been updated on 20.11.2018 in connection with an amendment to § 9, par. 1 of the TFP of the MAMLA (effective as of 01.10.2018).