EU directives, legislative amendments and changes to the rules- Litigation Committee newsletter article, April 2020
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For registering ultimate beneficial owners in Austria
Sharon Schmidt
Oblin Rechtsanwälte, Vienna
The incremental decline in Austrian litigation activity can largely be ascribed to the continued popularity of ADR methods, allowing for global enforceability in cross-border disputes. Notwithstanding these trends, Austria has also witnessed a surge of new developments relating to public and private enforcement.
In an effort to implement recent EU Directives, Austria has undertaken a number of legislative changes and amendments. The amendments made to Austrian competition law are particularly noteworthy. These are based on EU Directive 2014/104, as set out in the Austrian Cartel Act (KartG). The new rules include provisions on the submission of damages claims regarding antitrust infringements and are aimed at establishing greater certainty surrounding enforcement. They also offer changes to the limitation period for bringing such actions, extend rules on disclosure and shift the burden of proof to the defendant. This development has been supplemented by the implementation of EU Directive 2016/943 and amendments to the Federal Act against Unfair Competition (UWG), which centres on the protection of undisclosed business information and the prevention of industrial espionage.
The most recent implementation has been that of EU Directive 2018/843, which amends the local Ultimate Beneficial Owner Registry Law. It has attracted particular attention as the latest addition to what has become and intricate and highly sophisticated compliance scheme. Since coming into force on 10 January 2020, its amendments have introduced profound changes, some of which are highlighted below. Further revisions are effective as of November 2020 and March 2021.
Public access
- Access has traditionally been reserved to a limited group of individuals (eg, notaries, creditors, lawyers etc) and those having a legitimate interest to obtain information from the Register.
- Now anyone seeking access is guaranteed to obtain information on any legal entity’s beneficial owner.
Notification requirements
- Annual reviews to verify whether data entries are both complete and correct have formerly been deemed sufficient. Changes had to be documented and required notification. If no alterations were made to the register no further action would be required.
- At present, necessary changes must be registered within four weeks of the annual review being finalised. In the absence of such changes, an express notification must be provided confirming the validity of the registered data.
Trusts
- Transactions focussing on the use of trusts have previously been subject to the Austrian WiEReG (Economic Ownership Register) assuming there is a direct relationship between their administration and the forum. Potential indicators include the trustee’s permanent residence or legal seat.
- Registration is required irrespective of the location of administration, whether in Austria or another EU Member State, provided the trustee has entered into business relationships within or engaged in transactions involving purchases of real estate located in Austria. With regard to trusteeships, ownership interests must be identified in the register.
Penalties
- Incorrect/incomplete notifications, failures to comply with notification requirements (following two requests) or neglecting to register relevant changes within a four-week timeframe have been penalised in monetary terms (€200,000 for intent; €100,000 for gross negligence).
- The grounds for imposing penalties remain unchanged but have been extended. Failing to retain documents or other information necessary to ensure compliance with the aforementioned obligations allows for the imposition of fines (€75,000 for intent, €25,000 for gross negligence). Should a party become aware of information being either incomplete or false an electronic note has to be entered unless revisions are offered within a reasonable time. Penalties may now be imposed within six weeks rather than three months.
Compliance package
- As of November, a new data platform will come into force, aimed at centralising all relevant documentation surrounding the verification of ultimate beneficial ownership. Termed the ‘Compliance Package’, it purports to facilitate the register’s operation by storing previously uploaded notes, records and confirmations supplied by reporting entities.
Conclusion
Austria’s commitment to the creation of a minimum standard of public access to beneficial ownership has been strengthened and expanded by the recent amendments to the UBO register that came into force at the start of 2020. As an extensive platform that centralises beneficial ownership information, it serves as an essential tool, preventing money laundering, tax evasion and terrorist financing. In addition to the often overlooked but critical role of establishing citizen trust, this revised and streamlined approach also allows businesses to reduce costs and minimise the complexity surrounding their exercise of due diligence and risk management. By facilitating accessibility and increasing transparency, the recent changes of Austria’s legal provisions on UBO registers have the potential to solidify market stability as well as increase investor confidence and effectiveness in the allocation of capital.
The central location for recording both natural persons and legal entities taken together with the newly implemented procedural amendments, constitute critical tools in the practice of litigators both in relation to their asset tracing abilities and enforcement powers. With access to a now significantly broadened scope of information, they will be better equipped to combat complex crime and corruption in a manner that is not merely reactive but more effective and expedient.
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