The beneficial owner of a legal entity is…. Who is the beneficiary in simple words Beneficiary of funds
Hello, dear readers of the "site"! In this article, we will cover - who is the beneficiary, beneficial owner and beneficiary.
These concepts in the minds of most of our compatriots are closely associated with corruption. Beneficiary And beneficiary are terms that define physical or entity as a recipient of income from investment activities, from the transfer of their property to trust management, from the lease of real estate, etc. You will learn more by reading the article to the end.
About what a beneficiary is, who is a beneficial owner and how it differs from a beneficiary, what rights and obligations they have, read in this articleBeneficial owner - who is it?
Beneficial owner (from fr. benefit- benefit, profit) and beneficiary- a person or company that receives income from assets (in the form of rent, dividends on shares, insurance payments).
That is, the beneficiary owns any property: real estate, shareholding, trust fund or other asset. Being the owner, he transfers it for use to third parties, while does not participate in business life, but makes a profit.
The beneficiary may be on the board of directors, have the right to vote And participate in decision making.
The official definition under federal law is:
Beneficial owners are persons who have a share 25 percent or more in a legal entity and the ability to control its activities.
Their activities are regulated FZ No. 115 dated 07.08.2001, and it also speaks of beneficiaries, as of persons for whose benefit its own assets are operated, managed on the basis of trust management or a commission agreement. Read about it in one of our previous publications.
Here are examples of beneficiaries or beneficiaries:
- heirs accepting any property according to the will;
- landlords who rent their own property for a certain fee;
- owners of bank deposits;
- persons who have provided their own property or funds for trust management in order to receive regular income;
- owners of controlling stakes;
- persons receiving insurance payments;
- owners of their own companies.
Usually the owner of an asset does not advertise their condition to avoid threats to personal safety. At the same time, beneficial owners may not be mentioned in the statutory documents, or their activities are officially reduced to a minimum. As a rule, only bank employees or counterparties know about their participation.
IMPORTANT! The beneficiaries of the legal entity take part in the meeting of shareholders, their vote is decisive in the distribution of profits. The decision to invest is also made by the beneficiaries.
Preservation of the incognito of the real owners of a legal entity is explained by the following cases:
- business is conducted in offshore zones;
- legalization of funds received illegally to reduce the tax burden.
In order for the beneficiary to remain anonymous, the following organizational structures of companies are usually used:
- nominee director operates on the basis of a power of attorney;
- the beneficiary creates a trust fund, which he transfers to trust management;
- the beneficiary uses bearer shares.
Thanks to such schemes, the beneficiary has access to management through nominee managers.
There is also such a thing as ultimate beneficiary . This is a person who closes the chain of beneficiaries and receives the final profit from the operation of his assets.
2. Who is the beneficiary and how is it different from the beneficial owner 📑
In Russian legislation, these two concepts are slightly different.
Who are the beneficiaries and beneficiaries, what is the difference between them? Beneficiary - a person who has influence over the activities of the organization with the help of his share in 25 %. This may be a block of shares or part of the authorized capital.
Beneficiary - This broader concept, which includes rentiers, landlords and other persons receiving any income.
3. Who needs to know the ultimate beneficiary 💼
Supervisory state bodies one way or another they try to contact the beneficiary and monitor his activities for illegal activities such as:
- legalization of income received in violation of laws;
- financing of terrorism;
- tax evasion;
- outflow of capital abroad.
In addition to suppressing illegal activities, information is needed state when organizing tenders for public procurement.
In case of large loans banks may also be interested in the real owners of assets, in order to probe solvency and reduce the risk of default. Banks, in turn, must transfer information to Rosfinmonitoring .
So, information will have to be submitted to these structures in accordance with the current legislation in the prescribed form. The shape is called "Information about the chain of ownership, including the ultimate beneficiaries" and comprehensive information is entered into it, up to the addresses of residence.
4. Rights and obligations of beneficiaries
Rights of the beneficial owner:
- full disposal of their shares, up to the sale;
- control over the activities of management;
- the right to appoint or dismiss executives;
- participation in meetings of shareholders;
- influence on decisions made;
- receiving income from the activities of the company.
The obligations of the beneficiary are as follows:
- fulfillment of agreements concluded with contractors;
- repayment of credits and loans;
- timely submission of information to state control bodies.
5. The role of the beneficiary in payments
If an insured event occurs, specified in the policy, the insurance payment is received by the beneficiary. In this case, the beneficiary may not be the beneficiary, that is, the owner of the property, for example, if the mortgage is insured.
In inheritance matters the circle of beneficiaries is determined by the will of the testator. Thus, the persons specified in the will, or claiming the inheritance according to the law, will be the beneficiaries in the inheritance case.
6. Principal and beneficiary in a bank guarantee 💸
There are 3 parties involved in such a service as a bank guarantee:
- principal (party that needs a bank guarantee);
- beneficiary (the person to whom the final payment or transfer is intended);
- guarantee (the person or organization that guarantees the relevant payment or transfer).
The principal and the beneficiary are counterparties here. For example, the principal must pay the beneficiary for the supplied equipment. If the payment is not made on time, the guarantor will be responsible for this.
When do you need a bank guarantee?
- transfer of payments according to contracts;
- return of advances on failed transactions;
- fulfillment of the assumed credit obligations;
- customs clearance of goods;
- execution of works under state tenders and contracts.
The right to give a bank guarantee in Russia is monopoly owned by banks. The amount of the guarantee fee is 2 to 10 percent from the guaranteed payment.
Here the bank is the beneficiary, and the beneficiary is the party to whom the payment is to be received.
7. Offshores and beneficiaries 🌄📝
Countries or individual territories in a state with simplified business conditions.
A simplified business registration and reporting regime makes it easy for end beneficiaries to remain incognito.
Previously, the beneficiary was named controlling person , and should have minimum 50 % shares or half of the voting votes in the board of directors.
Later, when it turned out that 49 % of the shares are easy to get away from law enforcement in case of violation of the law, the concept was introduced beneficiary .
Now it is enough for the controlling person to have 10 % shares, have the right to vote or hold a management position.
8. Protecting the rights of beneficial owners
When a person transfers in part of his assets, there are always certain risks.
The main risks include:
- concealment of the real state of affairs at the enterprise by the current management;
- use of fraudulent schemes in work;
- violation of the terms of the trust agreement;
- non-compliance with deadlines and agreed amounts of income;
- reducing the influence of the beneficiary on the decisions made.
To minimize risks, it is necessary to trust management agreement , providing for serious sanctions for its violations, and insist on the unconditional implementation of all points.
9. Are there organizations without beneficiaries
Organizations without beneficiaries - these are all kinds of non-profit organizations, charitable foundations and associations, since they not intended to make a profit.
But even here, in the realities of Russian legislation, one can argue. For example, beneficiaries may be persons who receive charitable assistance.
10. Conclusion + helpful video 📺
Such a concept as a beneficiary is relatively new for Russia. According to the law, it is the transparency of the chain of owners that should guarantee the conscientious payment of taxes and protect the real economy from shadow schemes and machinations.
Managing partner, lawyer
24.01.2018
The word "beneficiary" has firmly entered the lexicon of everyone who is somehow connected with business, as well as with banking, tax, corporate and trust law. The concept of "beneficial owner" affects many aspects of the activities of legal entities, and for the beneficiaries themselves - predetermines a number of legal consequences.
Usually under beneficiary(beneficial owner, beneficial owner) means the real owner of the company, that is, the one to whom the company does not legally belong, but actually and ultimately, and the one who has a significant influence on the decision-making of such a company. The beneficiary in this sense can be only an individual, special person.
However, the concept of "beneficiary" may have different meanings depending on the area in which it is applied:
- First of all, the concept of "beneficial owner" is used in anti-money laundering legislation and financing of terrorism (hereinafter - AML / CFT) and banking legislation, as well as in the documents of international organizations in this area (FATF, OECD, EU).
- Further, the word "beneficiary" is used in corporate and trust law countries of the Anglo-Saxon legal family. The beneficiary of the company can be either its title shareholder or the person in whose favor the shares are held by the nominee shareholder. The beneficiary of a trust is a person for whose benefit (for the benefit) the trustee owns and manages the property transferred to the trust.
- We also refer to the “beneficial owner” as the person who has the actual right to the income (the actual recipient of the income), for the purposes of applying international double tax treaties.
- Finally, the concept of "beneficiary" partially intersects with the concept "controlling person", which is used for the purposes of taxation of controlled foreign companies in Russia.
Beneficial owner for AML/CFT purposes in Russia
In Russia, the concept of “beneficial owner” is used mainly in the context of anti-money laundering legislation. Federal Law No. 115-FZ of 07.08.2001 “On Counteracting the Legalization (Laundering) of Proceeds from Crime and the Financing of Terrorism” (hereinafter referred to as Law No. 115-FZ) gives the following definition:
Beneficial owner is an individual who ultimately directly or indirectly (through third parties) owns(has a predominant participation over 25% in capital) by a client - a legal entity or has the ability to control client actions.
Example. The sole member of the Russian LLC is a company registered in Cyprus. The 100% shareholder of the said Cypriot company is a company registered in the British Virgin Islands, of which N. is a 100% shareholder. In this case, N. is the beneficial owner of the Russian LLC.
In what cases is data on beneficiaries required?
1. Firstly, Article 6.1 of Law No. 115-FZ obliges legal entities to have information about their beneficial owners and take measures to establish information about them, as well as regularly update, document and store such information for at least 5 years. This requirement came into force on December 21, 2016.
The information that the legal entity must establish in relation to the beneficiary includes:
- surname, name, patronymic (if any);
- citizenship;
- date of birth;
- details of the identity document;
- data of a migration card, a document confirming the right of a foreign citizen or stateless person to stay (residence) in the Russian Federation;
- address of the place of residence (registration) or place of stay;
- taxpayer identification number (if any).
Entity obliged provide available documented information about their beneficial owners or about the measures taken to establish information about them at the request of the authorized body (Rosfinmonitoring) or tax authorities.
Failure by a legal entity to fulfill these obligations entails liability (Article 14.25.1 of the Code of Administrative Offenses of the Russian Federation) in the form of an administrative fine for officials from 30,000 to 40,000 rubles, for legal entities - from 100,000 to 500,000 rubles.
2. Secondly, organizations that deal with money or other property (namely - banks, brokers, insurance companies, investment fund management companies, realtors, pawnshops and a number of others), obliged take reasonable and accessible measures to identify the beneficial owners of their clients.
If, as a result of these measures, the beneficial owner has not been identified, the sole executive body (for example, the general director) of the client may be recognized as such.
In addition, banks (and other organizations dealing with funds) are required to update information on the beneficial owners of their customers at least once a year, and in case of doubt about the reliability and accuracy of previously received information, within 7 business days following the day of such doubts.
Finally, banks are required to submit to the authorized body (Rosfinmonitoring) at his request, information available to the organization on the beneficial owners of customers in the manner prescribed by the Regulation of the Central Bank of the Russian Federation dated September 20, 2017 No. 600-P.
Beneficial owner for AML/CFT purposes in the EU
In the Member States of the European Union, the “beneficial owner” is determined on the basis of Directive 2015/849 of May 20, 2015 on the prevention of the use of the financial system for the purposes of money laundering and terrorist financing (the so-called 4th Directive).
Pursuant to Article 3, paragraph 6, of that Directive, "beneficial owner" is any natural person(s) who ultimately owns or controls the customer and/or the natural person(s) for whose benefit a transaction or activity is performed.
When corporate legal entities The beneficial owner is the natural person who ultimately owns or controls the legal entity through direct or indirect ownership through a sufficient share of shares, voting rights or participation interests in such legal entity, including through bearer shares, or through control by other means.
“Direct ownership” refers to the ownership by an individual of 25% plus one share or more than 25% of the company. “Indirect ownership” occurs when 25 percent of the shares plus one share, or more than 25 percent of the participation interest in the client legal entity, is owned by another legal entity (or several legal entities) that is controlled by an individual. Member States are free to set a lower percentage for determining ownership or control.
When trusts Beneficial owner can be recognized:
- settlor of a trust;
- trustee;
- protector (if any);
- the actual beneficiaries of the trust, or, if such persons have not yet been identified, then the class of persons in whose interests the trust is established;
- any other natural person exercising ultimate control over the trust.
Please note that for the purposes of AML / CFT in the EU, beneficiaries of a trust can be recognized not only as a direct beneficiary (“beneficiary” in the terminology of the terms of the trust), but also other participants in trust relations - the founder of the trust, trustee, etc.
When funds(which are legal entities) or legal relationships similar to trusts, beneficial owners are individuals who hold equivalent or similar positions with the above persons for trusts.
In EU countries, the identification of the beneficial owner of a client of banks and other financial institutions is a prerequisite for establishing a relationship with him or concluding a transaction.
Corporate and other legal entities of the EU countries are required to obtain and maintain complete, accurate and up-to-date information about their beneficial owners, including the characteristics of their beneficial interest. Competent authorities (eg financial intelligence agencies) may have access to such information.
Further, the EU countries will have to create centralized registers of information about the beneficial owners of companies registered in these countries and determine the conditions, procedure and scope of public access to such data.
Beneficiary in corporate and trust law
IN companies the beneficiary may be:
- the title shareholder (the person whose details are indicated in the share certificate), or
- another person on whose behalf and in whose interests the shares are held by the nominee shareholder (in countries whose law allows nominal ownership of shares/stakes in companies).
In practice, the relationship between the nominee and the beneficial owner is fixed in a trust declaration or agreement (not to be confused with a "trust" - see below), according to which the nominee undertakes to refrain from any actions (for example, alienation, disposal) with the shares entrusted to him , unconditionally assigns to the beneficial owner all rights to receive dividends and other distributions of the company's profits, and also undertakes to exercise voting rights in respect of shares held by him only in accordance with the instructions of the beneficial owner.
Thus, the beneficiary of the company is not only the one who ultimately owns shares / shares in it, but also the one who gives instructions, binding on the nominee, and determines economic destiny company income.
When opening a bank account for a company in any bank, it will be necessary to indicate (and identify) the beneficiary, and not just the nominal owner of the company. Whereas the role of the nominal owner is limited to holding shares and formally being in the register of shareholders of the company. Legal responsibility for any actions of the company (including situations that led to litigation) lies with its beneficiary.
IN trust(we are talking about a full-fledged trust as a fiduciary legal relationship, and not about a trust declaration within the company, as described above) the beneficiary is the person in whose favor and in whose interests the trustee performs his duties of managing the property transferred to the trust. The beneficiary has certain terms of the trust interest in the property and / or income of the trust, however, does not have the right to manage the property of the trust and control over the actions of the trustee.
The design of a trust is typical for the countries of the Anglo-Saxon legal family (including a number of offshore jurisdictions) and is not provided for in most countries of continental Europe, including Russia.
Beneficiary for the purposes of applying the DTT
In international tax law (namely, for the purposes of applying double tax treaties (DTTs)) the word "beneficiary" has a different meaning. It refers to a person who has the actual right to income. Moreover, such persons can be individuals, legal entities, and other structures.
The fact is that the preferential provisions of the DTT (reduced rates or exemptions from tax) can be legitimately applied, provided that the recipient of the income (a resident of the state party to the DTT) is the person who has the actual right to such income. This wording is used in most Russian texts of the SID. In equally authentic English texts of the same DTTs, it sounds like “beneficial owner” (“beneficial owner”).
According to paragraph 2 of Article 7 of the Tax Code of the Russian Federation the person who has the actual right to income, a person (or a foreign structure without the formation of a legal entity) is recognized, which, due to direct and (or) indirect participation in the organization, control over the organization (structure) or due to other circumstances, has the right to independently use and (or) dispose of income received by this organization (structure).
foreign person not recognized having an actual right to income if it:
Possesses limited powers in relation to the disposal of these incomes,
- performs intermediary functions in relation to the specified income in the interests of another person, without performing any other functions and without assuming any risks,
- directly or indirectly paying such income (in whole or in part) to this other person who, if receiving such income directly from sources in the Russian Federation, would not have the right to apply the relevant provisions of the DTT.
This approach is designed to prevent the abuse of preferential provisions of the DTT in cases where, when income is paid from Russia to a person who is a resident of a DTT member country, the beneficial owner of the income is a third party from another, for example, offshore, jurisdiction with zero taxation. In practice, situations are also possible when the actual (final) recipient of income paid abroad is a tax resident of the Russian Federation (for such cases, the Tax Code of the Russian Federation provides for special rules - Articles 7, 312 of the Tax Code of the Russian Federation).
A foreign organization receiving income from Russia without withholding tax in Russia (or using reduced rates) in accordance with the DTT must provide a tax agent in Russia with documentary evidence of its actual right to income (paragraph 1 of Article 312 of the Tax Code of the Russian Federation). This requirement is effective from January 1, 2017.
"Beneficial Owner" and "Controlling Person" of a CFC
The definitions of “beneficial owner” for the purposes of AML/CFT and “controlling person” for the purposes of taxation of controlled foreign companies (CFC) established by Russian law do not coincide, but are often used as synonyms when it comes to the tax obligations of Russian beneficiaries of offshore companies. The differences are as follows:
Firstly, such a characteristic as “controlling person” is used in the Russian Federation only in relation to foreign companies and structures for tax purposes according to CFC rules. Whereas the concept of "beneficial owner" for the purposes of AML / CFT is applicable to any - both Russian and foreign companies.
Secondly, the basis for recognizing a foreign company as “controlled” is tied to the country of tax residence of the controlling person (that is, if such a person is a tax resident of the Russian Federation, then this foreign company is “controlled”). For AML/CFT purposes, the tax residency factor is irrelevant.
Thirdly, according to the Tax Code of the Russian Federation, a “controlling person” can be not only an individual, but also a legal entity. This, however, does not exempt individuals - tax residents of the Russian Federation, who indirectly (ie through Russian legal entities) control foreign companies, to declare their participation and control over them to the tax authorities of the Russian Federation.
Fourth, if more than half of the participants in a foreign company are tax residents of the Russian Federation, the percentage “bar” of a person’s participation in the company’s capital, the excess of which leads to the recognition of a person as “controlling”, becomes lower - and is no longer 25%, but only 10 % (subparagraph 2 of paragraph 3 of Article 25.13 of the Tax Code of the Russian Federation).
In practice (adjusting for the above features), the "controlling person" and "beneficial owner" of a foreign company often coincide in one person. Therefore, in media publications devoted to deoffshorization and taxation of CFCs, they talk about “beneficiaries”, meaning precisely “controlling persons”.
The beneficial owner of a legal entity is an entity that has an expanded range of powers compared to other participants who have a share in the authorized capital. From our article, you will learn about the main features of the beneficial owner of the organization, what are his powers and how he differs from other persons related to the activities of the company.
Who is the beneficial owner in an LLC?
According to the provisions of par. 13 art. 3 of the federal law "On counteraction ..." dated 07.08.2001 No. 115, the beneficial owners of a legal entity are individuals or other legal entities that independently or through third parties own this legal entity or have the right to exercise control over its actions. The basis for obtaining the status of a beneficiary is the presence of a share in the company's capital of 25% or more.
The procedure for determining the exact size of the share owned by a particular person is not determined by Federal Law No. 115, therefore, when resolving this issue, one can be guided by the procedure for determining the degree of interdependence of persons used in the field of taxation. The exact sequence of such actions is established by paragraph 3 of Art. 105.2 of the Tax Code of the Russian Federation, and also commented in detail in the letter of the Ministry of Finance “On the application ...” dated 16.08.2013 No. 03-01-18 / 33535.
The beneficial owner can:
- take part in meetings of shareholders;
- influence the choice of the head of the company;
- choose the field of activity of the enterprise;
- dispose of his share in the authorized capital, etc.
Information about the beneficiaries is not always displayed in the company's official documentation, but this is not an obstacle for them to influence its activities.
The reason for the lack of direct indications of the persons who are the beneficiaries of the company may be:
Don't know your rights?
- use of offshore zones for operations with cash flows;
- tax avoidance;
- legalization of proceeds from crime, etc.
Beneficiary vs Beneficiary - What's the difference?
It is worth distinguishing the essence of the concept of "ultimate beneficiary" from the concept of "beneficiary". As a last resort, according to par. 12 st. 3 of the Federal Law No. 115, any entity that has received income or other benefit from the company's activities can act. The basis for obtaining benefits may be the execution of various contracts:
- agency;
- commissions;
- surety;
- trust management, etc.
However, the beneficiary cannot take part in the distribution of profits and management of the company due to the lack of a share in its authorized capital. Thus, the concept of “ultimate beneficiary” is narrower than the concept of “beneficiary”, since an entity can be classified in the first category only if it has a share in the capital of the company defined by law, and also benefits from the implementation her activities. That is why, when violations of the law by an enterprise are detected, the regulatory authorities first of all conduct checks in relation to the beneficiaries, whose decisions and instructions set the main direction of its work.
Ultimate beneficiary of a legal entity
The owners of an enterprise may include not only individuals, but also legal entities that have one or more owners. In particularly complex cases, the number of links in such a chain can reach several tens. To establish who actually owns an enterprise with the powers to control and regulate its activities, it is necessary to find the ultimate beneficiary. The ultimate beneficiary is a person (or a group of persons) who exercises his right to exercise control over the activities of the enterprise indirectly, with the involvement of third parties, nominally empowering them to make strategically important decisions.
In the event that the final beneficiary deliberately hides information about himself, creates the appearance of transferring the right to manage to a third party, registering large bank accounts on him and concluding serious transactions on his behalf, law enforcement agencies intervene. Their main task is to study the accounts owned by the company and form a chain of their owners, which should eventually lead to the true owner of the legal entity. Such an approach makes it possible to reduce the amount of legalization of proceeds from crime, as well as to ensure the transparency of other transactions, including those conducted with the involvement of large public and private companies.
Identification of the ultimate beneficiary
An obligatory condition for the cooperation of an enterprise with government customers and credit institutions is the provision of information about its beneficiaries, which includes:
- passport data;
- address of official registration and actual address of residence;
- other information, the list of which depends on the organization to which they are submitted.
In order to improve the legislative mechanisms aimed at obtaining information about the ultimate beneficiaries, the Bank of Russia issued Regulation “On Identification…” dated 10/15/2015 No. 499-P, establishing:
- criteria for determining whether an individual/legal entity has the characteristics of a beneficiary;
- a list of documents that may be requested by a credit institution in order to establish the degree of compliance of the client with the specified criteria;
- rules for conducting the personal file of each client, etc.
Is the beneficial owner the founder or not?
The founder of the company can simultaneously be its beneficiary only if his share in the authorized capital is at least 25%. This means that any LLC participant who owns a share not exceeding the specified value has all the rights and obligations of the participant, but at the same time cannot directly influence the activities of the company and the results obtained as a result of its implementation.
Information about company members is not confidential and is posted in the public domain, including on public Internet resources (for example, on the website of the Federal Tax Service). Finding information about the beneficiary of an enterprise is much more difficult, since even law enforcement agencies may have problems with determining the person who has real authority to manage the company. That is why legal entities, in accordance with the current legislation, are required to disclose information about their beneficiaries (including final ones), and regulatory authorities and credit organizations are required to request such information in any interaction with the company.
So, the beneficiaries of a legal entity are individuals who own at least a quarter of its authorized capital, who receive profit from its activities. The main difference between them and beneficiaries is that the latter cannot participate in the activities of the company and make decisions that have a significant impact on its results. The ultimate beneficiary of a legal entity is a person who has the right to manage the company and is the final link in the chain of several real and formal managers.
Reading 9 min. Views 707 Published on 04/22/2018
The term "beneficiary" is multifaceted and has several meanings. The peculiarity of this word has become the reason that it is often applied out of place. . Beneficiaries are people who own securities that bring them profit.. Depending on the field of activity, certain obligations are imposed on the beneficiaries. People belonging to this category can use various methods of making a profit, each of which has its own subtleties and nuances. In this article, we will talk about what a beneficiary is in simple terms.
The beneficiary is the recipient of cash payments (income) according to the drawn up agreement or debt document
Term meaning
The word in question is borrowed from French, where it is used to denote profit. This means that the beneficiary is the owner of securities that bring permanent or temporary profit. The difference between beneficiaries and shareholders is that the former do not own shares, but various contracts. Despite this, the beneficiary can also own the shares of the organization, receiving a certain profit from the company's activities.
The ultimate beneficiary is a citizen in the status of an individual who has the right to own the enterprise. It is important to note that information about the identity of such a person is rarely publicly available. Most often, such information is available exclusively to the management of the organization. The confidentiality of this information is ensured by nominal organizations that conduct their activities without identifying the main owner. It should be noted that it is almost impossible to determine the identity of the beneficiary, thanks to a bank account, due to the fact that all profits from the company's activities go to the organization's account.
In order to understand who the beneficiaries are, consider a practical example. When concluding an agreement on the provision of certain services, the beneficiary is the party that is the seller of services in the settlement of the letter of credit. It should also be noted that the term in question is also used in the field of legal law.
The beneficiary may be a citizen indicated by the heir in the will, since this person will receive profit thanks to this document.
Often the term beneficiary is used in relation to lessors who lease movable and immovable property for temporary use. A person who conducts such activities belongs to the category under consideration, due to the receipt of profit through the possession of a lease document. Another example of beneficiaries are representatives of trust organizations, where the source of income is property values.
Differences between beneficiary and beneficiary
Having answered the question of who the beneficiary is, the term “beneficiary” should be considered. It is important to note that these terms have similar meanings. The term "beneficiary" is used in relation to people who receive income through the actions of the customer. There are many different contracts that become the basis for making a profit. These include:
- commission agreements;
- trust management agreement;
- agency agreements;
- surety agreements.
The beneficiary is the person who owns the documents for the property (company, business, real estate) and receives the main profit from this In addition, agreements on conducting various operations with property and material assets of an individual or organization can also become a source of profit for the beneficiary.
The beneficiary of the company is a person who conducts management activities with the help of third parties. An important feature of this activity is the receipt of profit equal to the percentage of the internal fund of the enterprise. The beneficiaries are entitled to full control of their own business. This right allows you to change the activities of the company in accordance with the needs of its owner. It is important to note that information about the beneficiary may not be recorded in internal and external documentation. However, the income of this person exceeds twenty-five percent of the total profit of the company.
Among the rights of the owners of the company, the possibility of transferring securities to third parties should be highlighted. Such actions may lead to an increase in the number of beneficiaries. Among the powers of these persons, it should be noted the right to form the initial statutory fund and choose a specific direction in which the organization's activities will be carried out. Appointment of a third party as a company manager is carried out on the basis of a joint decision of the beneficiaries. It is important to pay attention to the fact that these persons have every right to influence the decisions taken by the Board of Shareholders.
As mentioned above, the terms under consideration have a similar meaning due to the fact of profiting from the actions of customers or an enterprise. The difference between the beneficiary and the beneficiary is only in the amount of profit. Beneficial owners are given the right to manage the business, and their income is more than twenty-five percent of the total revenue. It is important to pay attention to the fact that such activities may cause interest from law enforcement agencies.
Since information about the true owners of the company in this example is “classified”, there is a high risk of illegal actions on the part of the true owner of the business, economic fraud and attempts to legalize funds obtained by illegal methods. Based on this fact, it can be concluded that the beneficiaries have a significantly lower level of responsibility for their actions.
The beneficiary, who is positioned as the owner of the securities, has the full right to transfer ownership rights Information about beneficiaries
When requested by law enforcement agencies, the management of the organization must provide information about the identity of the beneficiary without fail. Information about the beneficiaries is a prerequisite for concluding an agreement with budgetary organizations. Such data is necessary in order to obtain the most reliable information about the activities of the company and its leaders.
According to the current legislation, such information may be requested by financial institutions cooperating with the organization. It should be noted that, in accordance with the requirements of the law, financial institutions are required to provide regulatory authorities with information on persons with whom there are contractual agreements. An attempt to withhold this information can result in penalties in the amount of about half a million rubles. This factor explains the need to provide information about the ultimate owners of the company to financial institutions. It should be noted that banking institutions, carefully protecting their own reputation, do not cooperate with companies where information about the ultimate owners is hidden.
It is important to note that particularly strict control is established in relation to organizations that have nominal ultimate owners. A person who opens a personal account, endowed only with the right to sign and having the status of the title owner of the enterprise, may arouse suspicion among law enforcement agencies. There are special tools used by regulatory authorities to identify the owner of the company.
It is important to pay attention to the fact that at the time of concluding an agreement with credit organizations and budgetary institutions, the head of the company must provide documents reflecting information about all business owners. This means that the submitted papers should contain information about the details of the owner of the company. The list of required documents includes:
- Copy of passport and ID.
- Questionnaire of the ultimate owner of the enterprise.
- Information about the actual address of the owner of the company.
- Lack of these documents may lead to the termination of the cooperation agreement.
According to the established procedure, companies that closely interact with state-owned enterprises are required to provide information about their employees and beneficiaries.
Only an individual can act as a beneficiary What are the rights and obligations of the beneficiary
Beneficiaries are given the right to defend their own interests with the help of the court, in case of violation of their rights. Such violations include non-compliance by the company's management with contractual obligations, violations of licensing rules, illegal actions and attempts to reduce the influence of the ultimate owner on business development.
In the above situations, the ultimate owner of the business may apply to the court with a claim for violation of rights and obstruction of profit, according to the terms of the contract. It should be noted that in order to protect their own property (company), the beneficiary must draw up a competent trust management agreement. In addition, it is necessary to approach with increased attention to the choice of a candidate for a managerial position.
An agreement between the ultimate owner of the business and the manager is the basis for penalties or the complete termination of the contract. Such actions are allowed in situations where the actions of the manager infringe on the rights of the beneficiary or may cause the bankruptcy of the enterprise. It should also be said that there is the possibility of introducing certain conditions into the contract related to compensation for damage caused to the beneficiary. In case of violation of contractual obligations by the beneficiary, various penalties are also provided. If the fact of non-compliance with the terms of the agreement or actions related to the violation of the law is revealed, the company manager has every right to go to court.
At the time of concluding an agreement with a financial institution that provides loans, it is required to provide a profile of the ultimate business owner. In addition to the account opening agreement, a financial guarantee agreement is concluded. This document contains information about the methods of compensation for damage as a result of the actions of a hired manager. The beneficiary is granted the right to independently choose a financial institution acting as a protector of his interests.
The beneficiary of a legal entity, in case of non-receipt of the expected profit guaranteed by the terms of the contract, may apply for damages. It is important to note that such a claim can only be made after the expiration of the period during which the warranty is valid. In the event that such an application is received from the beneficiary, bank employees conduct an investigation in order to identify the validity of the claims. The decision on compensation for damages is made taking into account contractual obligations and the severity of the unlawful actions of the hired manager against the ultimate owner of the company.
Foreign companies and their branches are required to keep a register of beneficiaries Conclusion
In this article, we examined the meaning of the word "beneficiary". It should be noted that today, beneficiaries are quite common. Any person who acts as the owner of financial resources, securities, assets, as well as movable and immovable property can obtain such a status. On the part of the state, careful control of the actions of the ultimate owners of business entities is carried out.
The need for control is explained by the fact that information about beneficiaries rarely becomes public. Thus, law enforcement agencies protect the security and interests of citizens of the Russian Federation from the illegal actions of "shadow" entrepreneurs. In addition, when a company headed by a beneficiary cooperates with state institutions, the former must provide their partners with all information about the management of the company.
It should be mentioned that many businessmen are dissatisfied with such a policy on the part of the state, backing up their words with the right to confidentiality and protection of personal information. It is important to understand that the transparency of entrepreneurial activity is the key to continuous growth and strengthening of the company in the market. This circumstance forces beneficiaries to choose between the development of their own enterprise and the confidentiality of information about their identity.
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The work of the government on the development of civilized market relations leads to the need to regulate more and more new areas, those that could previously be called the "wild market". New rules are constantly appearing to regulate market relations and new economic entities are being legitimized. These include those persons who fall under the definition of beneficiaries.
Who are the beneficial owners?
The word beneficiary comes from the French word "benefice" (profit, benefit, income). A beneficiary is a person who receives income from the possession of his property or money under an agreement. At the same time, agreements that bring him material benefits can be of a different nature.
This person can be both natural and legal; in any case, this is the person to whom the cash payment is ultimately intended, or the recipient of benefits, income, profits, for example, from holding shares in the company, which allow him to receive income from its activities.
However, the meaning of the term "beneficiary" may differ depending on the situation in which it is used. The following persons are considered beneficiaries:
- heirs indicated in wills to any property, accepting it into ownership or receiving it for management;
- landlords who rent out their property (apartment, non-residential premises, car) and receive a regular fee for this, as they own the lease agreement;
- bank account holders who manage and control them and make a profit;
- clients of a trust company who have handed over their property for trust management and receive income from this;
- holders of documentary ;
- recipients of insurance payments under an insurance contract;
- business owners who receive income from their work.
Who are the final beneficiaries?
Ultimate beneficiary when owning a company, this is its real owner, to whom profit streams eventually “flock”. He can act directly, or maybe by owning other companies. Even if legally the company is owned by one person, the real rights of the owner may be completely different.
The following mechanisms can be used to formalize beneficial ownership:
- nominal agreement;
- a declaration of trust that defines the rights and obligations of the founders of the company and the owners of the trusted property;
- act of establishing a trust property.
Most often, information about the ultimate beneficiary is confidential and not widely disclosed. Offshore companies or nominee shareholders can be used to hide the ultimate beneficiary.
Is the beneficiary a beneficiary?
To understand this, we first of all find definitions for these concepts. This allows us to make the Federal Law No. 115-FZ of 08/07/2001.
beneficiary is a person who benefits from the actions of his client. It is possible to receive benefits on the basis of various agreements:
- commissions;
- agency;
- trust management;
- surety;
- conducting transactions with property or funds.
Beneficial owner is a person who ultimately directly or indirectly (through third parties) owns (has a majority interest of more than 25% in the capital) of the company or has the ability to control the actions of this legal entity.
Simply put, this individual enjoys all the rights of the owner of the company, has income from it and, in fact, is its owner, although legal ownership is registered with another person.
The beneficial owner, without disclosing his identity, has the opportunity to:
Both concepts are close to each other and have many common features. For example, both the beneficiary and the beneficiary receive income from the operation of their companies and organizations.
The legislation allows to draw a line between them - the beneficial owner must be the owner of more than 25% of the capital and thereby participate in the management of the company - indirectly or personally.
This is the main difference between the beneficiary and the beneficial owner - the ownership of a significant part of the profits.
Control of beneficiaries
It is this opportunity of beneficial owners to participate in the management of the company, to control its actions that is of interest to various inspection bodies. They may collect information about owners under certain circumstances to exclude:
- terrorist actions;
- financial fraud;
- criminal actions;
- legalization of illegal income, etc.
Information about the beneficiaries
The beneficiary, who is the owner of the company, has the obligation to provide information about himself in response to requests from regulatory authorities, when concluding contracts and agreements with state-owned enterprises. The collection of such information is carried out in order to obtain the greatest transparency of the actions of the company itself and to establish its true owners.
Banks also need information about beneficiaries. Starting from 2013, the owners of companies are required to provide such information about themselves. If banks allow the concealment of such data, this will entail imposing a fine of up to 500 thousand rubles on them, so beneficiaries have to provide this information at the request of state organizations and banks.
If the beneficiary does not provide such information to the credit institution, then, most likely, the company will be refused cooperation - the reputation and guarantee of transparency of its activities will cost more.
If it turns out that the owner is only entitled to sign documents, that is, he is only a nominal beneficiary, this will cause particular suspicion. In this case, it will not be difficult to find the true owner of the company - for this, the chain of account holders is studied, which will lead to the real owner.
If the company will sign contracts with government or credit organizations, it must provide information about the owners up to the final beneficiaries:
- passport data;
- actual address of residence of the beneficiary;
- complete application form of the beneficiary.
Without providing this information, the contract will not be concluded. Working with government organizations forces private companies to act absolutely transparently.
Protection of the rights of the beneficiary
Russian law gave the beneficiary the right to go to court to protect their interests. Other beneficiaries or the management of his own company can violate his rights:
- by non-compliance with the terms of the contract concluded with him;
- when conducting illegal activities or activities without a license;
- with a decrease in his rights to control in the company;
- by concealing by the management the fact of infringement of its interests in the process of work;
- under other circumstances that prevent him from receiving income, in accordance with the terms of the contract.
The beneficiary can also provide protection against the actions of nominee managers using a trust management agreement. Such an agreement makes it possible to terminate cooperation with the nominal management of the company in case of infringement of his rights. A properly drafted contract can oblige negligent managers to pay damages caused by their intentional or unprofessional actions.
Today, the strange word "beneficiary" can refer to any person - the owner of real estate, money invested in assets and bank deposits, even the owner of an insurance policy. In business, the state carefully controls the ultimate owners of companies, especially high-value ones. Sometimes such owners turn out to be high-ranking officials who provide all sorts of "assistance" to the firms they have created. Therefore, such control is, first of all, protective in nature and is aimed at observing the interests of all citizens.
Strict control of companies, aimed at identifying their ultimate owners, also occurs in their cooperation with state organizations. Sometimes beneficiaries are negatively inclined towards such measures, motivating this with their right to protect confidential information. But in an environment where the growth of large corporations and the increase in their income requires transparent business conduct, each beneficiary makes his own choice - to develop his business further or keep information about which companies he owns secret.
