Order n°2016-1635 dated 1 December 2016 required companies, other than those whose securities are admitted to trading on a regulated market, to declare their beneficial owners with the registry of the Commercial Court where their head office is located.
Decree n° 2018-284 dated 18 April 2018 was created to clarify the system for declaring beneficial owners. These clarifications came into effect on 21 April 2018.
The two following provisions of the decree should be highlighted:
1. The definition of the “supervisory power” exercised by the beneficial owner
Before 21 April 2018, article R. 561-1 of the French Monetary and Financial Code indicated that the beneficial owner of a company was the natural person:
– Either directly or indirectly holding more than 25% capital or voting rights in the company;
– Or exercising, via any other means, a supervisory power over managing, administrative or executive bodies of the company or over the general meeting of shareholders.
The new decree specifies the notion of “supervisory power” and amends article R. 561-1 of the French Monetary and Financial code to this end.
As of 21 April 2018, the supervisory power is now defined “within parts 3 and 4 of section I of article L. 233-3 of the French Commercial Code”.
The notion of “supervisory power” is thus clarified and a natural person shall be considered as fulfilling the review criterion in the two following cases:
– Either, he/she determines, via the voting rights in his/her possession, the decisions in the company’s general meeting (article L. 233-3, I, part 3);
– Or, he/she is a member or shareholder of the company and holds the power to appoint or to remove a majority of members of the administrative, executive or supervisory bodies of this company (article L. 233-3, I, part 4).
2. The default beneficiary owner
Before 21 April 2018, the texts did not indicate how to process a case where it is impossible to identify a natural person as a beneficial owner on the basis of criteria established in the first paragraph of article R. 561-1 of the French Monetary and Financial Code.
From 21 April 2018, the registry practice has been enshrined in the new decree. Article R. 561-1 now specifies that, when no natural person can be identified, the beneficial owner is the natural person or persons or, if the company is not registered in France their equivalent under foreign law, who legally represents the company, namely;
a) The manager or managers of partnerships, limited partnerships, limited liability companies, limited stock partnerships and civil societies;
b) The managing director of limited companies with a board of directors;
c) The sole managing director or the chairman of the board of limited companies with a board of directors and a supervisory board;
d) The President and, if needed, the managing director of simplified joint stock companies.
If the legal representatives mentioned in letter a) or letter d) are legal persons, the beneficial owner is the natural person or persons who legally represent these legal persons.
Even if the companies concerned by this obligation are presumed to have submitted their declaration by 1 April 2018 at the latest, the new aforementioned rules shall apply for the filing of any corrective statement required in the event of amendment to the initially declared beneficial owners resulting in a change to the shareholding or control of the company.