At the end of 2021, the Implementing Law on Registration of Ultimate Beneficiaries of Trusts and Similar Legal Arrangements was adopted and published. Based on this law, ultimate beneficiaries (UBOs) of trusts and similar legal arrangements must be registered with the Chamber of Commerce (CoC). These ‘similar legal arrangements’ include participants in joint account funds (JAFs).
The Implementing Decree (Implementing Decree on the Registration of Beneficial Owners of Trusts and Similar Legal Arrangements), which accompanies this law and details parts of it, was published on 2 May after much discussion. It contains implementing provisions relevant to FGRs and the registration of their participants.
The requirement to register trusts and similar legal arrangements in a central register is based on Article 31 of the amended Fourth Money Laundering Directive. The purpose of the register is to make transparent who are the beneficial owners of trusts and similar legal arrangements (whose trustee is domiciled or resident in the Netherlands, or whose trustee enters into a business relationship or acquires property in the Netherlands on behalf of the trust or similar legal arrangement).
Even as it was being enacted, the Implementation Act faced a lot of criticism. FGRs do not belong in the register of trusts” was a common (and justified) statement. After all, a trust has a very different character and is established for very different reasons than an investment fund in the form of an FGR. Moreover, investment funds and their managers are generally supervised by the AFM/DNB. This means that they already have to comply with the requirements of the Wwft, such as prior customer due diligence and reporting of unusual transactions.
The law would also lead to a (legally) unequal position compared to investment institutions that are not designated as FGRs and have a different legal form. This is because they are only subject to the registration requirement as of a 25% holding, whereas an FGR is subject to the registration requirement as of a 0% holding.
Despite this criticism, the registration requirement for FGRs was maintained. However, in the further development of the implementing decree, the criticism has been largely taken into account by allowing simplified registration under certain conditions.
With the entry into force of the Law and the Implementing Decree, in addition to the natural persons who are directors of the manager and the depositary, natural persons with an interest in a CIS will, in principle, also have to be registered in the UBO register.
Under the draft implementing decision, all participants with a 3% or more interest would have to be registered in the UBO register. This would create additional administrative burdens, in particular for open-ended UBO funds. They would have to keep track of who is above (and who is below) the 3% limit and to sign these persons in and out of the register.
However, in the final Implementing Decision, the 3% threshold has been replaced by a specific possibility to indicate, instead of the individual participants of an FGR, the group of beneficiaries for which the fund is established. For example, “participants in the investment fund”.
This is only possible for FGRs that:
If an FGR does not fall under the above criteria, the manager must still report all holdings above 0%. This will be the case, for example, for FGRs managed by a manager that falls under the so-called “AIFM-light regime” (based on Section 2:66a Wft). There may also be common account funds of licensed AIFM or UCITS managers where the FGR is or will be offered to less than 150 individuals.
In an earlier draft, it was stated that the first criterion would not be the offer to at least 150 persons, but the current number of participants. The criterion “offer to at least 150 persons” is now in line with the existing exemption criterion from the licensing requirement for an AIFM in Section 2:66a Wft. This adjustment has been advocated by various parties. This is partly because the number of participants may change during the life of a fund. It may be the case that at the start or end of a fund there are no more than 150 participants (which would require the participants to be registered), while at another stage this is not (or no longer) required.
In summary, the following natural persons qualify as a UBO of a CIS:
One of the main advantages of an FGR is its anonymity. FGRs do not have to be registered with the Chamber of Commerce and therefore do not have to publish annual figures. To ensure the privacy of persons registered as UBOs, the register is divided into a public and a private part. Nevertheless, the registration requirement ensures that certain information about the FGR’s UBOs is made public. In addition to the name, month and year of birth, nationality and place of residence of the UBO, the nature and extent of the economic interest is also disclosed. The interest is expressed as a percentage. It is therefore not possible to see exactly how many assets are involved.
| Public information | Private information |
| Name | Name and type of trust/FGR |
| Month and year of birth | Date and place of incorporation |
| Nationality | Objective of FGR |
| Residential state | Citizen service number |
| Nature and extent of economic importance | Nature and extent of economic importance |
| Date of birth | |
| Country and place of birth | |
| Residential address | |
| Copy of identity document | |
| Copy of documents showing economic interest |
The registration requirement will apply from 1 November 2022. As the registration obligation is new, a transition period will apply. The registration deadline has been extended from 1 February to 1 April 2023. More information on registering trusts is available on this website.
If your FGR is or will be offered to fewer than 150 individuals (or the trustee does not hold an AIFM or UCITS licence), a copy of the UBO’s identity document and documents showing the nature and extent of its economic interest will be required when registering individual participants.
If you want to avoid the administrative burden and additional disclosure, you could consider how the FGR could fall under the criteria that allow you to suffice with the indication of “investment fund participants”. Finally, you could consider whether another legal structure for your fund is possible instead of a CIS (e.g. a limited partnership).
Projective Group is happy to help you with regulatory compliance. Do you have questions about the information in this article? Or do you need help with qualifying the UBO(s)? Feel free to contact us.
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