The European Commission has concluded public consultations on the rules for submitting information to beneficial ownership registers. The document has been published on the Commission’s official portal.
What beneficial ownership reporting is and why it is necessary
The issue of transparency in business ownership structures has existed for centuries. Disputes and investigations on this matter have been widely reflected in historical records, investigative materials, literature, and cinema.
Company owners are often interested in concealing the fact that they have registered a particular business. The motives may vary. In some cases, a legitimate entrepreneur may fear for personal safety, which is understandable. However, business owners frequently hide their identity for entirely different reasons.
These may include corrupt officials using political influence for improper gain, organized crime figures laundering illicit proceeds, entrepreneurs seeking to deceive their own partners, or fraudsters who never intend to fulfill contractual obligations.
Businesspeople engaged in “tax optimization” are also reluctant to disclose personal data — for example, those operating domestically through offshore jurisdictions or improperly using preferential tax regimes.
To “hide” from oversight, entrepreneurs most commonly use chains of shell companies or nominee “agents,” such as the fictional chairman Funt from the novel “The Golden Calf.”
Thus, a kind of legal “game” unfolds. Dishonest entrepreneurs and representatives of organized crime attempt to “hide,” while tax authorities, financial intelligence units, police officers, lawyers, notaries, counterparties, journalists, and civil society activists seek to determine who actually stands behind a particular business.
A beneficial owner is a person who directly or indirectly owns a company or exercises significant influence over its decision-making. The ultimate real owner may not be listed in the company’s founding documents and may not directly hold its securities. The forms of control may vary widely, but this does not change the fact that this person is the true beneficiary.
The concept of “beneficial owner” began to be used in international taxation in the 1940s (under the 1942 Double Taxation Avoidance Agreement between the United States and Canada). It was later adopted by the United Kingdom, which concluded similar agreements with a number of countries.
In the second half of the 20th century, the issue of beneficial ownership became particularly acute. Following the collapse of colonial empires and the redistribution of global wealth, many new states and self-governing territories with limited resources began generating income by offering foreigners the opportunity to register companies anonymously.
Such companies either paid minimal taxes in their place of registration or were fully exempt, limiting their obligations to fixed fees. Later, these firms acted as “foreign investors” in the countries where their beneficiaries actually conducted business, thereby avoiding taxation at the place of real economic activity. Similar schemes were also used by organized crime figures and corrupt officials.
As a result of such “tax optimization,” developed and resource-rich countries began losing substantial amounts of revenue. This prompted them to initiate the creation of international organizations aimed at combating money laundering and fiscal violations.
In 2012, the Financial Action Task Force on Money Laundering (FATF) adopted another package of recommendations, including Recommendation 24 on the “transparency and beneficial ownership of legal persons.” Since 2020, FATF experts have been working on amendments to strengthen this recommendation.
These amendments were officially adopted in 2022. The FATF called on all countries to prevent the misuse of legal entities for money laundering and terrorist financing. To this end, authorities must collect information on company control and beneficial ownership and provide access to such information to “competent” bodies.
For a long time, the European Union was at the forefront of promoting corporate transparency. EU regulations required companies to disclose information about their beneficial owners and publish it in dedicated public registers accessible to anyone. However, this approach sparked public debate, as detailed information about business owners made them vulnerable to extortion and fraud.
In 2022, the European Court of Justice, acting on a claim brought by an entrepreneur from Luxembourg, annulled Brussels’ requirement to publish beneficial ownership data. The Court justified its decision by emphasizing the need to protect the right to privacy and personal life.
Following this ruling, EU member states began gradually restricting access to their beneficial ownership registers and seeking a legal balance between corporate transparency and the protection of the rights of individuals who own businesses.
What the EU leadership plans to do regarding beneficial ownership oversight
Following the 2022 court ruling, the process of implementing an updated beneficial ownership reporting framework in the EU has been developing at two levels: national and EU-wide.
In 2024, the EU adopted two key instruments concerning oversight of ultimate business owners: Regulation (EU) 2024/1624 on the prevention of the use of the financial system for money laundering and terrorist financing (AML Regulation) and Directive (EU) 2024/1640 on mechanisms to prevent the misuse of the financial system, which introduces central registers of beneficial owners in each Member State.
In adopting these documents, the EU leadership demonstrated an approach fundamentally different from that which existed prior to 2022. In particular, EU legislation no longer provides for unrestricted public access to beneficial ownership data.
Directive 2024/1640 establishes the principle of demonstrating a legitimate interest in order to obtain such information. At the same time, it specifies that journalists, investigative civil society actors, and researchers are deemed to have a legitimate interest. Anyone requesting information on company beneficial owners must now be identified.
Overall, the Regulation and the Directive set out the core principles for the establishment of beneficial ownership registers, their content, access rules, supervision mechanisms, and risk assessment related to their functioning.
Guided by the provisions of the Regulation and the Directive, EU Member States have begun adopting national legislation governing access to their beneficial ownership registers. In particular, the Netherlands and Italy are currently addressing these issues.
However, the EU leadership has decided to take a more comprehensive approach to regulating the functioning of beneficial ownership registers and to introduce detailed rules at the central level. From 26 November to 24 December 2025, the European Commission conducted public consultations on the rules for submitting information to central registers of beneficial owners.
This initiative will establish the formats to be used for submitting to central registers the information on beneficial owners referred to in Article 62 of Regulation (EU) 2024/1624. The concept of beneficial ownership was introduced to enhance transparency of complex corporate structures in the fight against money laundering and terrorist financing.
— according to the European Commission’s explanatory note to the draft regulatory act.
The package submitted for discussion includes a draft implementing regulation and annexes containing the detailed rules.
Through these documents, the European Commission seeks to standardize as much as possible the procedures for reporting and maintaining beneficial ownership registers, eliminating potential inconsistencies in this area. A transitional period is planned to give responsible national authorities and businesses sufficient time to implement the new requirements.
The rules require a clear categorization of company owners and the visualization of the ownership structure itself. The organizational chart must include the names and legal forms of all legal entities and legal arrangements involved.
It is specified that the rules recommended by the European Commission are not exhaustive. National jurisdictions may introduce additional requirements to address other objectives. Legal entities are allowed to register beneficial owners not necessarily all at once, but individually — until all have been duly recorded.
To reduce administrative burdens, registers may obtain part of the required information from other existing databases.
The sequence for providing personal information about beneficial owners is defined as follows:
- First name;
- Last name;
- Place of birth;
- Date of birth;
- Residential address;
- Country of residence;
- Nationality;
- Type of identity document;
- Number of the identity document.
Standard datasets for legal entities and their managers have also been defined. The following categories of persons to be included in the register are specified:
- Founder;
- Trustee;
- Beneficiary;
- Holder of authority;
- Person who committed a violation;
- Protector;
- Natural person exercising ultimate control.
Types of control include:
- Control through direct ownership;
- Control over voting rights;
- Control over appointment rights;
- Control through veto rights;
- Control through profit distribution;
- Control through formal or informal agreements;
- Control through family relationships;
- Control by agreement or concerted action;
- Control through nominee arrangements.
If it is impossible to identify a beneficial owner, the register must include an explanation of the reasons (absence of a beneficiary, specific ownership structure, legal особенностей владения, death of the beneficiary, “beneficiary not yet born,” or exhaustion of all reasonable means to identify the beneficiary).
The rules also detail the formats for providing data on different categories of beneficial owners to various categories of applicants requesting access to the register.
It is emphasized that responsible national authorities must accept information only in the proper format and are required to verify it.
The European Commission has received a number of recommendations and comments on the draft rules from law firms. These are currently under review.
If the rules successfully pass all required procedures, they may enter into force in 2027.
What is a commercial register?
In our video, we explain what a commercial register is and how you can check your business partner.
If you need to verify your foreign business partner, contact Schmidt & Schmidt.
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