Following the introduction of a public register of persons with significant control for the British companies and LLP (from April 2016), as well as for the Scottish partnerships (since June 2017), some British dependent territories, under pressure from the UK itself, have created similar registers / databases. However, these centralized registers will be closed, and the access to data from them will be available only to the British competent authorities and only upon request. This decision has become a compromise after many years of negotiations and frictions, since the overseas territories, although partially subject to the law of Great Britain, are still self-regulatory. On the one hand, access to these closed registers / databases will enable the UK law enforcement agencies to monitor tax evasion, as well as terrorists and criminals hiding behind the anonymous companies. On the other hand, this will put an end to the requirements for the introduction of open registers of beneficiaries in the countries partially controlled by Great Britain. Among such states are the Cayman Islands, the British Virgin Islands, the Isle of Man, Bermuda, Guernsey, Jersey, and others. As the British Virgin Islands (hereinafter - the BVI) are the most popular with our clients among offshore jurisdictions, we will consider legislative changes in connection with the agreements reached with the UK.

So, after the exchange of official communications between the governments of the BVI and the UK on June 12, 2017 the Law on Beneficial Ownership Secure Search System (hereinafter - BOSS) was adopted, and from June 30, 2017, it came into force. In accordance with this law, at the moment, the work is in progress on creating a central database (server) on the BVI, which will contain all the information and supporting documents about the beneficial owners of all corporate entities and legal entities registered in this jurisdiction. This database will be used to facilitate the effective transmission of information on the ultimate beneficial owners by the competent BVI authorities at the request of an authorized law enforcement agency of the United Kingdom.

The beneficial owner in the BOSS Act is defined as a natural person who ultimately owns or controls directly or indirectly 25% or more shares or voting rights of a legal entity. It should be noted, that, however, there is a threshold of 25% or more for the purposes of the BOSS legislation for claiming a report on a beneficial owner, in other BVI legislation, on combating terrorism and money laundering, it is set of more than 10%. This means that the registration agent can request information about all persons who control more than 10% of the company’s shares. The information about the trustee or other person who controls these legal relationships is subject to disclosure, as well as information about the founder or another person with whom a nominal agreement is concluded.

The BOSS Act allows each Registered Agent to create its own databases for storing information about the ultimate beneficial owners of legal entities, which, in turn, will be available to officials of one of the following authorized competent authorities:

  • Financial Investigation Agency;
  • Financial Services Commission;
  • International Tax Office;
  • Chamber of Attorney General.

The BOSS Act requires to provide the following information for each beneficial owner:

  • name;
  • address of residence,
  • date of Birth,
  • citizenship.

The requirements for storing information in BOSS are also listed in the Law. The requirements for the relevance of data in BOSS are also established. The companies are required to notify the registered agent of any changes in the beneficial ownership or the information about the beneficial owners provided by law for filing, within 15 days from the receipt of information about such changes, indicating the date of these changes. After this, the registered agent must take all necessary steps to update the BOSS system within 15 days after receiving the notice of the changes.

Strict penalties are imposed on both companies and registered agents for non-compliance with these requirements. Strict punishment for registration agents (fine or imprisonment) is also provided for provision of knowingly false information concerning a corporate legal entity, since this is considered a crime. In conclusion, we note that the BVI has concluded a number of agreements on the exchange of tax information with other countries. In addition, information on beneficial owners has always been available to competent authorities that have submitted a proper request to the relevant BVI body. And this means that BVI, like other offshore jurisdictions, are moving towards transparency with long strides, and the offshore companies are gradually losing their anonymity.

The Cyprus holding companies are widely used in the context of international business structuring for the optimization of the channels of incoming and outgoing investment in/from the countries that have signed an agreement with Cyprus on avoidance of double taxation. Recently, the Tax Department has published a guide to VAT accounting for holding companies, which is designed to provide clarity with respect to the circumstances under which the Cyprus holding companies can receive taxable income.

Definition of taxable activities

The common position and practice regarding the regime for levying VAT on dividends remain unchanged. The simple acquisition and ownership of shares in other companies by a Cypriot company does not constitute a taxable business activity in the sense of exploiting assets for income generation. The reason for this approach is that the dividends received from such ownership of shares are considered to arise solely at the expense of ownership of shares, rather than from the form of business activity carried out for the purpose of income generation. Consequently, an enterprise that simply owns shares or a similar form of a stake in another organization is not considered to be taxable. However, if a holding company goes beyond the simple exercise of its rights as a shareholder and takes an active part in the management of its subsidiaries, directly or indirectly, this may constitute a taxable activity.

The test for determining whether such participation in management exists is objective. There are no decisions in the European Court that set out specific rules or precedents on this issue. Each case must be considered individually on specific facts and circumstances. The instruction states that the term “management” can cover a wide range of activities, from organization and administration to the adoption of strategic decisions. These actions can be taken directly, that is, by a legal entity owning shares or indirectly - by a person hired or connected with a legal entity that owns the shares.

Any evaluation should be based on the essence, not on the form. For example, do the directors of affiliated companies exercise autonomous powers to manage their business, or do they simply mechanically approve decisions made at the level of the holding company? These issues should be resolved on the basis of specific facts, such as the degree of duplication or general powers of the director and decisions of the board of directors.

A holding company that has a controlling interest in a subsidiary company clearly has the right to influence the decision-making process in the subsidiary. If the facts show that the holding company exercises this right, any dividends received can be considered a reward for the provided management services and, therefore, income from business activities.
An additional important factor is that the holding company has the necessary human and other resources to provide such services. The instruction states that in some cases the holding company can not use its authority to influence its subsidiary, therefore it is a passive investor with the sole purpose of obtaining dividends without participation in management.

The current jurisprudence is that the company’s participation in the management of the invested company is recognized as economic activity in accordance with Article 3 of the VAT Law and Article 9 (1) of the EU VAT Directive (2006/112 / EU) and therefore it is subject to VAT in accordance with Article 5 of Cyprus Law and Article 2 of the EU Directive.
A holding company, like other companies, must be registered by a VAT payer if its taxable supplies exceed the registration threshold or it receives services from foreign suppliers that must be taken into account within the framework of the reverse charge mechanism.

Otherwise, the holding company can be registered voluntarily. The amount of input VAT that the holding company can reimburse will be based on the distribution between its taxable and non-taxable activities.

The newspaper “Journal du Dimanche” previously published information about the intentions of the French President Francois Hollande to hold a meeting with the leaders of Germany, Spain and Italy on March 6 in Versailles, dedicated to the future of the European Union. This mini-summit, among other things, should have to demonstrate the unity of the leaders of the four major European powers of the euro zone in the face of the many threats and crises that the EU is currently facing. The agenda also included the study of the issues “related to ensuring the strengthening of the development of the European Union”.
On March 6, the government supported the changes to the Law on the Financial Instruments Market, the Law on Alternative Investment Funds and their Managers, as well as the Audit Services Act. What is the ultimate goal of these changes? They should make the EU financial market more transparent and stable, reduce systematic risks, protect depositors, and ensure the effectiveness of financial markets and reduce the costs of their participants. The changes in the laws have been designed to adopt the Directive of the European Parliament and the Council on the markets of financial instruments.
In the process of painstaking work over the directives on the part of institutions and EU Member States, the assessment of the existing supervisory practice of the financial market was made, insufficient transparency in the general financial markets was recognized, actually taking place and partially unregulated trade actions by the regulations were analyzed.
The outcome of the integrated assessment was the conclusion that the existing regulation is not sufficient to ensure the full stability of the financial markets and transparency of their activities. Thus, in order to solve and eliminate the identified shortcomings, the draft directives have been developed.
By adopting the Directive, the financial institutions of the Member States have provided the comprehensive regulation to ensure the protection of depositors. An important part of this regime is the protection of customers’ funds and financial instruments. The duties of the investment brokerage companies is the implementation of appropriate measures to protect the rights in respect of securities and cash assets entrusted to the investment brokerage company, as well as the property rights of the depositor.
Investment brokerage companies will have to implement the appropriate specific order to ensure the protection of financial instruments and customer funds. The main goal of all legislative changes under consideration remains clarification of the legal regulation of investor protection and increase of the transparency of related procedures.
We will hope that, in accordance with the overall strategy, a single integrated legal and economic approach to the legislative reform of the EU countries will effectively ensure fair treatment for all participants in the financial market. And, in order to find always the necessary benchmarks in constantly changing trends and organize effectively your business in the EU and not only - contact the specialists of the company Finance Business Service!

In a press release of January 29, 2018, the Council of Europe announced the second set of additional directives on the negotiations detailing the position of the EU-27 (27 EU Members without the UK) regarding the transition period with respect to Brexit. These directives give the Commission the authority to initiate discussions with the UK on the terms of Brexit and establish a transition period, no longer than until December 31, 2020.
During the transition period in the UK, full and constant application of the EU legislation is provided. However, the state will no longer participate in the EU administration and the decision-making process.
On January 30, 2018, the EU Commission published a document warning the companies of the key challenges in the customs and VAT that they will have to be overcome when the United Kingdom is not a Member of the EU. If no other transition period is agreed between the EU and the UK, the European Customs and VAT regulations in the UK will no longer apply from March 30, 2019, as the UK officially announced its intention to leave the EU on March 29, 2017. This document provides a brief overview of the customs and VAT implications that will arise from the actual date the UK left the EU. From the date of delivery to and from the UK, it will be qualified as imports and exports, rather than intra-Community sales (including the filing of customs declarations, the application of customs duties, etc.).
The document also emphasizes that a number of licenses (for example, customs licenses, the status of the Authorized subject of economic activity) issued by the UK government will no longer operate in the EU and the imports to the UK will no longer be able to use the preferential tariff agreements concluded by the EU with third countries.
A number of other issues, such as the impossibility of the UK to use the European MOSS system and VAT refund procedure after the end of EU membership, are also briefly considered. Moreover, the British companies will be treated as non-EU companies, so they may need to appoint a fiscal representative in a number of Member States for their local registration as VAT payers.
On November 7, 2017, the UK government also published a draft law on taxation (cross-border trade), which is part of the basic legislation establishing the British legislative framework in the field of customs and VAT. At this stage, there are no detailed provisions on many issues. The bill has passed the second reading in the Parliament on January 9, 2018. At present, there is no declared position regarding the transition period, but it is expected in the upcoming government statements.
According to the information document to the British bill, it is designed in such a way to be flexible enough for a range of possible outcomes of the negotiations, including a transition agreement and a scenario where the agreement has not been reached.
In any event, there is uncertainty in the final form that Brexit will acquire and its timing. In this regard, it is recommended for the British companies, as well as European companies with British ties and interests to prepare for the worst possible option, the so-called “complex Brexit scenario”. Along with other issues for the settlement, the implications for VAT and customs clearance will be central to the preparation of Brexit.

On December 5, 2017, the European Council adopted amendments to the legislation regulating VAT rules for online sales of goods and services in Europe, developed by the European Commission a year ago. These legislative changes were adopted within the framework of the strategy of “single digital market” and aimed at simplification of the payment of VAT on purchases of goods and services on the Internet by the European consumers.

The changes assume:

  • simplification of the current Mini One Stop Shop (MOSS) mode for cross-border telecommunications, broadcasting and electronic services
  • transition to taxation at the place of destination (location of the recipient) and simplified reporting through MOSS for remote sales of goods
  • introduction of an obligation to pay VAT for electronic interfaces (for example, platforms) that facilitates the delivery of low-value goods imported or sold in the EU by the suppliers from outside the EU

Since the new legislation consists of a two-tiered package of measures, it comes into force in two phases: in 2019 and 2021.

From 2019, the changes will touch the MOSS system. There is an exception that allows micro-enterprises of the EU to pay for the supply of telecommunications, broadcasting and electronic services (TBE), the volume of which is below the threshold of 10,000 euros per year, in the country of their registration. In addition, many of these enterprises will receive the exemption from VAT payments in practice due to the fact that their supplies often fall under the system of benefits for domestic small and medium-sized enterprises (SMEs).

Another simplification aimed at reducing the administrative burden of SMEs in sales of B2C below 100,000 euros per year is the requirement of only one confirmation of the location of its customers and therefore, of the country of taxation.

The next softening concerns the rules for billing: from 2019, the Member State in which the provider is identified within the MOSS will independently determine the need for billing for cross-border telecommunications, broadcasting and electronic services.

In 2021 the most significant changes concerning remote sales will enter into force.
The new rules will allow the companies that sell goods through the Internet to fulfill their VAT obligations within the EU countries through a digital online portal (OSS), organized by their own tax administration in their own language. At the moment, these rules exist only for the providers of electronic services.

It is supposed to use two OSS systems in parallel for the declaration of all cross-border sales on the basis of the tax portal of the Member State. The first one will cover remote sales of the goods within the EU, B2C TBE services, as well as other B2C services provided by a taxable person outside its Member State.

The second OSS will cover remote sales of goods imported from third countries or territories (outside the EU), which actual value is 150 euros or less. Taxable persons outside the EU will be able to use this OSS only if they designate an intermediary in the EU or if they are established in the country with which the EU has an agreement on mutual assistance and goods are shipped from the same country. For consignments with an actual cost of less than EUR 150, sent to the EU by the companies that have not chosen this OSS scheme, special agreements will be applied. In this case, the logistics intermediaries can declare and pay VAT in the Member State of destination in a simplified manner, and possibly, taking into account the standard VAT rate (if such is imposed by the Member States).

At the same time, there will be elimination of the current VAT exemption for the import of small lots for an amount not exceeding 22 euros from outside the EU, which leads to unfair competition and infringement of companies in the EU (which must apply VAT regardless of the value of goods sold).
The responsibility of trading platforms for B2C deliveries of imported goods or suppliers not included in the EU

For the first time, large online trading platforms will be responsible for ensuring the payment of VAT on sales on their platforms, which are produced by the companies from third countries for the consumers in the EU.

Electronic interfaces become the main responsible party for the deliveries made with their help, even if the actual supplier is registered as a VAT payer in the country of destination. The need to introduce this measure is caused by the use of mechanisms of cross-border fraud, in which the goods imported for remote sales enter the European Union without VAT, in some cases through such interfaces. In such cases, Member States find it difficult to contact the original foreign supplier in order to levy VAT.

With this approach, the EU imposes the responsibility on electronic interfaces for collecting VAT on sales of goods along with an already existing rule for electronic services that are sold through such trading platforms. Therefore, the EU joins other jurisdictions, such as Australia and India, implementing or considering such an approach.
From 2021, some changes in the technical functioning of OSS will also come into force. This relates to the specific rules for the terms of filing the declarations (extended to 30 days after the end of the quarter), possibilities of adjustments of the past declarations and coordination of the audit of transactions submitted under the OSS.

In order to implement these changes, the European Commission is charged with developing rules in accordance with the principles of effective regulation, including consultation with stakeholders and impact assessment. In particular, this will focus on creating the basis for the claimed provisions applicable to electronic interfaces, as well as for the timely introduction into the relevant customs systems that will have to support the import OSS as of 2021.

By the end of 2019, the European Commission will assess the readiness of these measures, which could lead to a full or partial delay in the changes of 2021 if the problems are discovered that prevent the correct application of the new rules.
These initiatives are the next step towards the creation of a single European VAT area in accordance with the recent proposals of the Commission on reforming the European VAT.

The Swiss Financial Market Supervisory Authority has issued regulatory guidance on ICO.

Switzerland is still on the list of the most popular jurisdictions for the organization and development of the activities that are related or based on blockchain, many of which are funded through ICO. In this regard, the Swiss Financial Market Supervisory Authority (hereinafter referred to as FINMA, the Authority) published regulatory guidance on February 16, 2018 determining the direction for future normative regulation in this field. In addition, FINMA has also clarified the expectations regarding the requirements for the requests relating to the application of the Swiss financial markets legislation in the context of the specific ICO projects.

The document, entitled “FINMA Recommendations regarding requests on legislative regulation of Initial Coin Offering”, published on February 16, 2018, is a continuation of the initial recommendations on the legislative regulation of ICO, which were published in September 2017. The purpose of these recommendations of the Swiss Financial Market Supervisory Authority is to inform future and existing market participants about how FINMA intends to respond to the requests for legal and regulatory aspects of ICO. The recommendations also unify the principles which FINMA is guided by when evaluating private projects in accordance with the Swiss law on financial markets, in particular in the field of combating money-laundering and regarding securities.

Among the key points that are covered in the regulatory recommendations, we note the following:

  • Tokens are subject to categorization: there are payment tokens, utility tokens and asset tokens.
  • Depending on the category of the token, the provisions of different legislation apply. At the same time, FINMA reaffirms its approach based on a neutral approach to technology, and stresses the need to determine carefully the ICO compliance with the current Swiss law on a case-by-case basis.
  • FINMA indicated that additional guidance and/or clarifications could be issued in the future if necessary. The preparation of special legislation on such issues in Switzerland in the near future is not provided.
  • In view of the large number of ongoing ICO projects, the new regulatory recommendations, issued in February 2018, provide useful information on procedures and required information, based on which FINMA determines the need for the application of legislation and compliance with a specific project on ICO.
  • FINMA confirms that a certain number of non-disclosed ICOs are checked by the service and again warns from legal risks that arise on organizing or participating in an ICO.
  • In addition to the application of financial market legislation, other important aspects of Swiss corporate, contract and tax law, as well as the regulatory issues of foreign law may need careful analysis before launching an ICO.

Today we will consider the categories of tokens and the application of the Swiss law to the certain types of tokens.

Categories of tokens

Based on the analysis of each individual project, the guidelines of FINMA focus on the economic features of the tokens. The key factor is that the trade in tokens is mainly carried out by transferring them, which occurs as public sale. And, as long as there is no generally recognized classification of tokens, FINMA differentiates three categories for its analysis:

  • Payment tokens (cryptocurrencies) are the tokens that have no special features or links to other development projects. After a while, after accepting, their payment tokens become a means of payment.
  • Utility tokens are the tokens, which purpose is to provide digital access to certain applications or services.
  • Tokens equated to securities are the tokens that provide assets (participation in physical assets, business, earnings, dividend rights, interest payments, etc.). The economic features of such tokens are the same as equities, bonds or derivatives.

Application of Financial Market Law and Regulation

FINMA determined that in practice, the application of regulations related to anti-money laundering and securities regulation are the most relevant. At the same time, the application of other legislative acts, for example, on the regulation of banking activities or normative acts regarding collective investment schemes may be applicable as well.
On the basis of the above-mentioned, FINMA will apply AML- and securities regulation as follows:

  • ICO of payment tokens: It requires compliance with anti-money laundering regulations, if the payment tokens are transferred at the time of issuance. In this case, payment tokens are not considered to be securities.
  • ICO of utility tokens: Pure utility tokens that can be used as of the time of issuance, they can not be treated as securities. However, if the utility token also functions as an investment, then the Authority will treat it as a security.
  • ICO of asset tokens: It is absolutely obvious that such tokens will be treated exclusively as securities.

Legal implications

The application of anti-money laundering regulations triggers several due diligence requirements (identification of beneficial owner, obligation to join a self-regulatory organisation (SRO) or accepting direct FINMA supervision). In addition, the requirements can also be met by accepting the funds through a financial intermediary that is subject to Swiss AML-regulation and that exercises the due diligence requirements on behalf of the issuer.

If tokens are treated as securities, the relevant legislation applies, and the public issuance of shares and bonds in the form of tokens naturally requires compliance with the relevant prospectus requirements.

The application of the provisions of other regulations may cause the necessity of the fulfillment of other requirements, such as, for example, obtaining a licence from FINMA.

The format and methods of delivery of many goods refer them to the category of services, especially if they are transmitted over the Internet, such as e-books, music downloads, streaming of content. The regime of VAT for this particular subcategory of services provided electronically has undergone significant changes lately. In this blog, we will consider the requirements of the current European legislation, and we will try to cover the coming changes in this area in the next ones.
In accordance with the European legislation, came into effect from January 1, 2015, telecommunications, television and radio broadcasting, as well as electronic services, are subject to VAT at the location of the client, whether it is a business or a consumer, located in or outside the EU .
However, in order to ensure the correct taxation of these services, the supplier needs to determine the status of his client (whether he is a VAT payer), as well as his location.
The easiest and most reliable way to define whether a customer is a business or a consumer is to ask him for a VAT number. Suppliers can check the VAT numbers of their customers using the website of the VAT Information Exchange System (VIES):
The location for the business (VAT payer) is defined as the country of registration or the country in which it has a permanent location and receives the service. The country of registration or the country in which territory he has a permanent address or usually resides is the location for the consumer (not a VAT payer).
If everything is more or less clear with telecommunications and broadcasting, but we should consider the concept of electronic services in more detail, since we face it more often than we think. In the European legislation, electronic services are defined as services provided through the Internet or electronic network, the nature of which makes their provision automated with minimal human intervention, as well as the provision of which is impossible in the absence of information technology.
There is rather extensive list of electronic services, but we list only the main ones:

  • digital products in general, including software and updates to it;
  • provision or maintenance of the presence of business or personal presence in an electronic network, such as a website or web page;
  • e-mail, automatically created from the computer;
  • hosting of web sites and web pages;
  • administration of remote systems;
  • online data storage, where specific data is stored and retrieved electronically;
  • access or uploading of photos, graphics or screen savers;
  • digitized content of books and other electronic publications;
  • subscription to online newspapers and magazines;
  • blogs and website statistics;
  • online news, traffic information and meteorological reports;

  • provision of advertising platforms, including advertising banners on the website / web page;
  • use of search engines and Internet directories;
  • access or download of music, movies, games on computers and mobile phones.

In order to declare and pay VAT (both in the EU and outside), a supplier can use the online declaration / payment method via Mini One Stop Shop (“MOOS”) by registering on the relevant web portal in the EU country, where he is registered as the VAT payer. It should be noted at once that this scheme is not an obligatory, but a simplifying measure. It allows taxable persons not to be registered in each of the Member States where their customers are located.
In practice, according to this scheme, a taxpayer registered in the MOOS in the EU Member State (state of identification) electronically submits a quarterly MOOS declaration which lists the supply of services to tax-exempt persons in other EU member states (consuming states) together with VAT subject to withholding. These declarations together with the VAT paid are transferred then by the State of identification to the appropriate consuming States through a secure communications network.
When cross-border services are provided to business, a client from another EU country (relative to the supplier) will independently pay the tax in the framework of the reverse charge mechanism. This system allows the buyer of the service to calculate the tax at the rate of his country and report on it by indicating the amount of tax payable in the declaration and the same amount of tax to the deduction. Actual cash flow does not occur, but the controlling bodies receive information about the movement of services within the EU.
The rules of VAT on the taxation of electronic services, telecommunications services, as well as television and radio broadcasting services can be visually presented as follows

The exception to the general rule is the rule of effective use and consumption. It is used when:

  • the place of delivery is in the European Union, but the services are consumed outside;
  • the place of delivery is outside the EU, but services are consumed in the EU.

Efficient use and consumption take place when the client actually consumes the services not at the location, regardless of contractual terms and payment.
For example, the services for the provision of banner advertising on the website of the publication, provided by the company in Germany for business in the United States, as a general rule, are taxed at the customer’s place of registration, and, accordingly, the European VAT is not charged. However, if the website of the publication is used for an advertising campaign within Germany, the German competent authorities, using the rule of effective use and consumption, may decide that VAT is levied in Germany.
So, the essence of the legislative requirements for levying VAT from electronic, telecommunications, and television and radio broadcasting services is to ensure the suppliers to pay VAT for such services in each EU country in which they provide them. It may lead for many companies to a legal requirement to register VAT by the payers separately in each EU country where they have clients. This is the reason why the MOSS system has been created, by which the declaration and payment of VAT on several European countries can be made through a single electronic declaration submitted to the local tax authority.

The European Parliament plans to create a new committee on financial crimes, tax evasion and tax planning. This decision was taken by the Chairmen of the factions of the European Parliament on February 8 and it is awaiting approval in the plenary vote.
The main goal of the committee, which will last 12 months, will be the completion of work done by the members of the pre-existing TAXE 1, TAXE 2 and PANA committees, as well as focusing on the so-called “Paradise Papers” - recent information leaks.
Thus, the co-chairman of the Greens / European Free Alliance (Greens / EFA) fraction, Philippe Lamberts, noted: “Paradise Papers demonstrated the existence of clear objectives and serious volume of work that we must do if we want to ensure fiscal justice throughout the European Union. We want to be sure that the national treasuries are able to collect funds which are necessary to maintain the common prosperity of the EU”.
According to the official, the EU Parliament’s Panama Papers Committee has already developed a well-prepared plan of measures to reduce the cases of tax evasion. The new committee will ensure the maintenance of the progress achieved and the implementation of the necessary measures by the Commission and governments throughout the European Union.

The Verkhovna Rada supported on second reading and in general the law “On Limited Liability Companies and Additional Liability Companies” (No. 4666) with technical and legal amendments. According to the Interfax-Ukraine Agency, 285 people’s deputies voted for the document.
As the Chairman of the Verkhovna Rada Committee on Economic Policy Andrey Ivanchuk (the fraction “People’s Front”) has noted, presenting the law in the parliament, now this issue is regulated by the legislation adopted back in 1991. At the same time, according to the words of the official, limited liability company is the most popular type of Ukrainian companies, and today there are more than half a million of them.
Andrey Ivanchuk also added that regarding the law No. 4666, they received 503 amendments on second reading, 360 of which were taken into account.
The law provides that the value of the LLC’s share is established as of the day before the meeting of the LLC members, at which the decision to exclude the member from the LLC was made.
The transitional provisions of the document also contain the provisions for the compulsory acquisition of a share by a member.

On January 24, 2018, the Companies (Amendment) Bill 2017 was passed, which mandates incorporated companies of Hong Kong to keep a Significant Controllers Register (SCR). The new legislation will enter into force on March 1, 2018. The Hong Kong Companies Registry has set up a special section on SCR on its website containing, amongst others, a detailed Guideline on the Keeping of SCR and specific forms for the companies to use.

The main requirements for the new SCR regime are listed below.

Who are required to keep a SCR?

All companies “formed and registered” in accordance with the the Hong Kong Companies Ordinance, including dormant companies, financial institutions, charitable organizations, companies limited by guarantee and any other types of companies incorporated in Hong Kong, except for the listed companies, and foreign companies registered under Part 16 of the Hong Kong Companies Ordinance, must keep a SCR.

What should be contained in the SCR?

The SCR must contain information on the significant controllers of the applicable company, namely registrable persons (i.e., a natural person or a specified entity such as a government and international organisation) and/or registrable legal entities (i.e., a legal person, but not a specified entity, which is a member of the company) who have significant control over the company.

Significant control

A person has significant control over if one or more of the specified conditions have been fulfilled, which include holding directly or indirectly more than 25 percent of the issued shares (or voting rights) in the company, the right to exercise or to have significant impact or control over the company.

The examples are given in the Hong Kong Companies Registry SCR Guideline explaining what may constitute “exercising significant influence or control”, such as having veto rights in adopting or amending the company’s business plan or appointing (removing) the CEO.

Particulars Required

Registrable persons: name, address, identity card/passport number, date of registration of a person, and nature of control.
Registrable legal entities: name, address, registration number, legal form and governing law, date of registration of a legal entity, and nature of control.

How to prepare the SCR?

The applicable company has an obligation to ascertain the identity of any significant controller. In other words, the company that is subject to the new SCR regime must:

  1. take reasonable steps to identify its significant controllers and the required particulars;
  2. send out written notice to significant controllers requesting required particulars (or confirmation of particulars) within seven days after 1 March 2018;
  3. enter the date of Notice in the SCR;
  4. enter the particulars in SCR within seven days after receipt of all required particulars provided or confirmed by the addressee of the Notice and date of receipt of such confirmation (in the case where no confirmation is received within the statutory period of one month); and
    follow similar steps for any change in particulars to keep the SCR up-to-date, i.e; and
  5. send the notice to a person within seven days, knowing (or having reasonable grounds to believe) that a particular person (or entity) is a new significant controller; or in the case where the identity of the new significant controller is unknown, send the notice to third party whom the company believes (or having reasonable grounds to believe) to know the significant controller within the prescribed time; and
  6. to enter the particulars within seven days after receiving the confirmation by the significant controller (or a negative statement if it is appropriate).

Where is the SCR to be kept?

The SCR must be kept in English or Chinese language at the company’s registered office or at a prescribed place in Hong Kong. The Company must notify the Registrar of Companies of the place where the SCR is kept within 15 days after its creation or any change in location.

Access to SCR is limited only to officers of Companies Registry and law enforcement officers (who currently include Police officers, Independent Commission Against Corruption, Securities and Futures Commission, Hong Kong Monetary Authority, Insurance Authority, Customs and Excise, Immigration, or Inland Revenue Department). The company will have to appoint a representative who will serve as a contact point for providing information about the SCR and appropriate assistance to law enforcement officers.