The Register of Beneficial Owners – Legal implications and practical considerations

Dr Stefan Patrick Gauci, Head of Business Advisory Integritas Group

The Register of Beneficial Owners has been introduced into Maltese Law in 2018, but still remains a relatively unknown piece of compliance legislation among directors, company secretaries and other officers involved in corporate matters on a daily basis.

These Regulations were introduced into Maltese legislation, in the wake of the Panama Papers and the Paradise Papers, as part of the wider EU-driven initiative of ensuring more transparency on the identity of the beneficial owners of companies across Europe. At the same time, the Regulations further  strengthen the legal framework in the fight against money laundering, the funding of terrorism and tax evasion, just to name the more important ones.

The Registrar of Companies has an obligation to maintain the Register of Beneficial Owners for access and inspection by competent authorities as identified by the Regulations and the wider public, though there are restrictions on the information publicly accessible.

On their part, the officers of a company are also obliged to maintain their own register of beneficial owners with respect to that company which must be maintained up to date on a regular basis. The Registrar of Companies may at any time conduct inspections, in person or remotely, to ascertain and ensure that companies are indeed adhering to their obligations. Company officers are expected to cooperate fully during such inspections. There are also annual and other periodic compliance obligations that the officers must ensure compliance with by filing the respective forms with the Malta Business Registry within statutory deadlines.

Non-compliance with the Regulations may give rise to different and varying consequences, ranging from reprimand to administrative penalties, which in certain cases may be quite hefty, to the extent of the Registrar proceeding to strike the company off the Register of Companies, with the resultant consequence that any assets of the company so struck off devolving in favour of the Government of Malta. 

The more comforting news in the event of a striking off is that the shareholders may seek to have the company restored to the Register, but that is certainly not a solution that does not come with its own complexities, not to mention the time and cost factor involved in bringing the company back into a state of good standing.

The penalties imposed in terms of the Regulations may be perceived as punitive and so they are in the event of non-compliance. However, the main intention in this respect is that the penalties should act as a deterrent against non-compliance. Company officers, therefore, ought to be fully aware of their obligations under the regulations and must ensure that the company is at all times maintained in good standing and that all their records about the beneficial owners are properly kept and up-to-date.

Ensuring that a company is compliant comes at a cost; either because the officers invest in in-house resources to fulfill their obligations or they engage professional service providers to assist them on such matters. The truth is that non-compliance is even costlier. Compliance is a “must have”.