Marese Stafford

Posted on by Marese Stafford

New regulations affecting the beneficial ownership of corporate entities came into effect this year. Marese Stafford, ACIS AITI explains what’s changing and how to comply with the requirements.

Minister Paschal Donohoe recently signed into law The European Union (Anti Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019. Among other requirements, the new rules, which replace earlier (2016) regulations, require companies, trusts and certain other organisations to obtain and hold information on their beneficial owners. It is important to understand the changes as penalties, including fines of up to €500,000 and a possible custodial sentence of up to 12 months, can be imposed for failing to comply with the new regulations.

Who is affected?

Relevant entities under the new rules include Irish companies, Irish Collective Asset Management Vehicles (ICAVs), industrial and provident societies and other bodies corporate. A beneficial owner is any natural person who directly or indirectly owns or controls a shareholding of 25% plus one share.

What is changing?

The new rules impose a duty to submit certain information to a new Central Register of Beneficial of Ownership of Companies and Industrial and Provident Societies (Central Register). Corporates in existence at 29 July 2019 must upload their information by 22 November 2019. Those incorporated on/or after 29 July 2019 will have 4 months within which to deliver the required information. As was the case under the old rules, a relevant entity must keep adequate, accurate and current information in respect of its beneficial owners and state the nature and extent of the control exercised by them.

What information must be provided to the Central Register?

Relevant entities must provide the following details in respect of their beneficial owner(s):

  • Name
  • Date of birth
  • Nationality
  • Residential address
  • PPS number
  • Statement of the nature and extent of interest.

Information on the Central Register must be kept up to date. Non-compliance, or provision of false information, could lead to fines of up to €500,000 and a custodial sentence of up to 12 months.

What if we can’t identify a beneficial owner?

The regulations state, that if after having exhausted all possible means and provided there are no grounds for suspicion by the relevant entity, no natural person is identified — or if there is any doubt that any natural person identified is a beneficial owner of the relevant entity —the names of the one or more natural persons who hold the position of senior managing officials of the relevant entity shall be entered on the Central Register.

How do I provide information?

A new online platform www.rbo.gov.ie has been launched.

Who can access the Central Register?

Unrestricted access to the information on the Central Register is given to An Garda Síochána, members of the Financial Intelligence Unit (FIU), the Revenue Commissioners, the Criminal Assets Bureau, and other bodies engaged in the prevention, detection or investigation of possible money laundering or terrorist financing. The general public and other designation persons will be allowed restricted access but will not be able to access private residential addresses and PPS numbers.

Need help?

The new regulations — S.I. No. 110/2019 – European Union (Anti-Money Laundering: Beneficial Ownership Of Corporate Entities) Regulations 2019 — are available online (www.irishstatutebook.ie). If you have questions, or need more information about what they mean for you, please contact a member of our team.

Posted on by Marese Stafford

As your business develops, there can be advantages to restructuring as a limited company. However, incorporation is not for everyone, explains David O’Connor.

For sole traders, restructuring your business as a limited company can be an attractive option, particularly if you are in the higher income tax bracket or if you need to raise funds to grow your business. However, it is important to take professional advice as incorporation may not necessarily be the best, or the only option, to consider.

Advantages of Incorporation

Tax is usually cited as the main advantage when forming a limited liability company. This is because companies pay 12.5 percent corporation tax on their trading profits whereas a sole trader’s profits are taxed at the marginal income tax rate plus USC and PRSI. While the directors and shareholders of the company must still pay income tax, they can limit their earnings so that they are taxed at the lower income tax rate, leaving any remaining profits in the company to fund future development or be extracted at a later date.

Other advantages of incorporation include:

  • A company is a separate legal entity. This means that, with some exceptions, where the company incurs a liability, the liability rests with the limited liability company rather than with the directors and shareholders.
  • The liability of company shareholders (with the exception of unlimited companies) is limited to the amount they paid for the shares whereas for sole traders there is no limit on their personal liability for the debts of the business.
  • Company pension contributions enjoy greater tax advantages than self-employed pension plans.
  • Companies have greater flexibility to when it comes to remuneration. For example, they can reward directors and shareholders by way of salary, directors’ fees and dividends.
  • Companies can pay business expenses to employees and directors at civil service rates whereas sole traders can only claim for the actual expenses incurred.
  • Companies have the ability to raise finance by issuing shares and are more attractive to investors because of their limited liability.

Disadvantages of Incorporation

 

A disadvantage of incorporation is that companies have additional reporting and filing obligations and directors can be prosecuted for failing to comply with company law.

Loss of confidentiality can be a concern for some businesses as certain company information is publicly available through the Companies Registration Office.

Another issue is that incorporation can sometimes have an adverse tax impact, especially for businesses with trading profits below a certain threshold. Therefore, unless there are other compelling reasons, incorporation is generally not advisable for these businesses.

There are also anti-avoidance measures in place to counter situations where the main motive behind a transaction is avoidance of tax.

For certain businesses, alternatives to incorporation may be worth considering. Farm businesses, for example, should weigh the advantages of partnership and/or succession partnership before deciding to incorporate.

Practical considerations

Having considered the options and taken appropriate professional advice, if you decide to proceed with forming a limited company, there will be a number of practical issues to address. These include transferring assets, property, insurance, utilities and contracts to the company, setting up new bank accounts, advising creditors and debtors of the change, revising employee contracts, notifying Revenue and registering the directors as employees, updating licences, and ordering new stationery.

Conclusion

Changing your structure is a major business decision and professional advice should always be obtained. It is important to consider not just immediate needs, but also your long term plans, including your succession plan. While forming a limited company can be the right choice for many businesses, it is not for everyone.

For further information and to find out how Sheil Kinnear can help, please contact a member of our team.