Statement on determination and state registration of ultimate beneficial owners of non-governmental organizations

01 October 2021

To the Verkhovna Rada of Ukraine

As the latest amendments to the legislation in the field of prevention of legalization of proceeds from crime entered into force, the majority of legal entities, whose founders (owners, participants, members of higher management bodies, etc.) fall under the definition of ultimate beneficial owners, are obliged to enter information about the ultimate beneficial owner and the ownership structure into the Unified State Register (USR) by October 11, 2021.

At the same time, only political parties and their structural entities; trade unions, associations of trade union organizations, stipulated by the statute of trade unions and their associations; creative unions and their local branches; employers’ organizations and their associations; bar associations; apartment building co-owners associations; chambers of commerce and industry; religious organizations; government agencies; local self-government bodies and their associations; state and municipal enterprises, institutions and organizations are exempted from entering information about the ultimate beneficial owner.

The law strengthened the requirements for already registered legal entities in terms of submitting information to the state registrar about the presence or absence of the ultimate beneficial owner and the ownership structure. At the same time, a three-month period was set for taking appropriate actions, which began on July 11 and will expire soon – on October 11.

Given the above, the Ministry of Justice of Ukraine approved an update to Form 2 (“Application for state registration of legal entity (except for civic formations and government agencies); Form 4 (“Application for state registration of legal entity – civic formation”); Form 6 (“Application for confirmation of information about ultimate beneficial owner of legal entity”).

To date, the authorized representatives of the central bodies of executive power still refrain from providing official explanations regarding the procedure for filling out the relevant forms and submitting documents, which in practice leads to refusals to enter information about the ultimate beneficial owners or to inaccurate information entered into the USR. In fact, economic entities are placed in conditions when their actions aimed at bringing information about them into compliance with the requirements of the law are indirectly blocked by the state.

In particular, it is about the establishment of a knowingly insufficient period for the submission of information about the ultimate beneficial owners by economic entities, the absence of official recommendations or clarifications from the authorized state bodies.

Given the fact that the outlined procedure is quite complicated from an organizational point of view, a situation has arisen in the state in which a large number of economic entities will not have time to provide information on the ultimate beneficial owners by the end of the deadline for submitting relevant information, October 11 of the current year. Otherwise, for failure to submit or late submission of information about the ultimate beneficial owner or its absence or documents to confirm information about the ultimate beneficiary of a legal entity to the state registrar, a fine between 1,000 and 3,000 tax-free minimum incomes (i.e., from UAH 17,000 to 51,000 in 2021), and in accordance with Art. 166-11 of the Code of Ukraine on Administrative Offenses, the head of a legal entity will be held liable.

In total, the above, among other things, makes it impossible to fully provide the relevant persons with the requirements of the quality of the law, as an integral component of the principle of the rule of law, guaranteed by Art. 8 of the Constitution of Ukraine, as well as the Universal Declaration of Human Rights. Thus, the provisions of the analyzed amendments to the law contradict the requirement that the law should be accessible to interested persons and formulated with sufficient precision to give them the opportunity to regulate their behavior to be able – if necessary, with appropriate consultation – to foresee the consequences that their action may entail to the extent reasonable under the circumstances.

Therefore, as of today, the state, represented by the authorized bodies of the legislative and executive branches of power, must take immediate measures to resolve the above situation.

At the same time, on September 22 of this year, the Parliamentary Committee on Economic Development recommended that the Verkhovna Rada of Ukraine should adopt at first reading draft law No. 5807, which stipulates that if the founders of a legal entity are exclusively natural persons, who are the ultimate beneficial owners of such a legal entity, information about its ultimate beneficial owner shall not be indicated; to register changes to information about a legal entity, a natural person who is the ultimate beneficial owner of a legal entity shall submit a notarized copy of the document certifying the person only if the specified document is missing in the files of the registration case or if it is changed; the deadline for legal entities registered before the entry into force of this Law to notify the state registrar of information about the ultimate beneficial owner and ownership structure shall be increased from three months to one year.

However, the requirement to provide information on the ultimate beneficial owners for non-governmental and charity organizations is an unjustified interference with the freedom of association. CSOs work for public, not private interests, their benefit is aimed at the public. Therefore, the amendments that can be made through draft law No. 5807 would make it possible to remove the social tension surrounding the analyzed issue, allowing to ensure that legal entities do not submit relevant information.

In view of the above, taking into account the need to consolidate the efforts of government agencies and civil society organizations in the area of ensuring the rights of economic entities, we call on the Verkhovna Rada of Ukraine to include civic associations with the status of a legal entity and charity organizations in the list of legal entities that do not submit information about the ultimate beneficial owner of a legal entity (Paragraph 9, Part 2, Article 9 of the Law of Ukraine “On State Registration of Legal Entities, Individual Entrepreneurs, and Civic Formations”), for example, through the adoption of draft Law of Ukraine “On Amendments to Certain Laws of Ukraine Regarding Determination and Submission of Information about Ultimate Beneficial Owner and Ownership Structure of Legal Entity” No. 5807 of July 20, 2021 with appropriate amendments at second reading and as a whole.

Sign the statement at the link.

Civil society organizations that expressed support for the statement:

ICAP “Yednannia”

Ukrainian Center for Independent Political Research

Center for Democracy and Rule of Law (CEDEM)

Ukrainian Helsinki Human Rights Union

Human Rights Centre ZMINA

Reanimation Package of Reforms

NGO “Association for the Promotion of Self-Organization of the Population”

NGO “Detector Media”

NGO “CRIMEASOS”

Together Against Corruption

International Charity Fund “Caritas of Ukraine”

Ukrainian Volunteer Service

Ukrainian Youth Association in Ukraine

Charity Fund “Vostok SOS”

Media Initiative for Human Rights

International Charity Fund “IZOLYATSIA. PLATFORM FOR CULTURAL INITIATIVES”

NGO “Odesa Institute of Social Technologies”

NGO “Access Point”

International Charity Organization “German-Ukrainian Partnership Network”

NGO “Development Together”

Charity Organization “Charity Fund “Station “Kharkiv”

NGO “Parents in Action”

Coalition of NGOs “Zaporizhzhia Council of Reforms”

NGO “UKRAINE:ACT”

NGO “Halychyna Development Institute”

Charity Fund “International Development Foundation”

Charity Organization “Charity Fund “Territory of Creativity”

NGO “Owl Expert Group”

Charity Organization “Doctor Bersenev International Charity Fund”

NGO “Union of IDPs of Donbas “DOBROTVOR”

NGO “United Veteran Movement “VzayemoDiya””

NGO “Local Democracy Foundation”

NGO “Institute of Reforms and Innovations”

NGO “Institute of Social Policy of Region”

NGO VI “Kharkiv Station”

NGO “CENTER OF INITIATIVES FOR SUSTAINABLE DEVELOPMENT”

NGO “MOLOdDIY”

NGO “Indomitable Women”

NGO “Club “BABYLON”

NGO “Wind of Change of Popasna District”

Poltava branch of the Social Service of Ukraine

Civic Association “Sheep and Goat Breeding of Ukraine”

NGO “My Province”

Charity Organization “Charity Fund “For Ukraine”

NGO “Center for Conscious Parenthood “Sources of Joy”

Stanytsia Luhanska Center for Social and Cultural Development “Great Family”

NGO “ILYUS”

NGO “Training and Consulting Center on Access to Information”

NGO “Educational and Methodological Center for Protection of Human Rights”

Alliance for Civil Rights

Vetpromspilka

NGO “Union of Veterinary Business Owners”

NGO “Center for Development of Civic Initiatives “Podillia Region”

Zaporizhzhia Regional Charity Society of Beekeepers

NGO “By acting we influence!”

Civic Association “Ukrainian Association of Manufacturers and Distributors of Veterinary Medicines and Feed Additives”

Charity Organization “Charity Fund “Zvezda”

NGO “Join and Change”

NGO “Zaporizhzhia Without Garbage”

NGO “Legal Provision”

GO “AUST-ER”

NGO “Promoting Village Development”

NGO “Women’s Professional League”

Kharkiv Non-Profit NGO “Modern Woman”

NGO “Legal Innovations”

GO “Motion+”

GO “SMART MEDIA”

All-Ukrainian Youth NGO “Hometown”

NGO “Civic Stance of Ukrainian”

NGO “Choice”

NGO “Social Prospect”

NGO “Crimean Human Rights Group”

NGO Center “Social Indicators”

NGO “For Yourself”

BF “BO SAM”

NGO “Lustration Anti-Corruption Council of Prydniprovye”

NGO “Kharkiv City Federation of Kettlebell Sports”

Sports Federation of Kettlebell Fitness of Ukraine

NGO “All-Ukrainian Parent Project “MIO-LIFE”

NGO “Safe Place”

Odesa Regional Organization of All-Ukrainian NGO “Committee of Voters of Ukraine”

NGO “Center for Social Transformations”

NGO “SHTUKA”

Khmelnytskyi District NGO “PRAVO”

Kirovohrad REGIONAL ORGANIZATION of the All-Ukrainian NGO “Association for the Promotion of Self-Organization of the Population”

NGO “Edelweiss Human Rights Information Center”

NGO “NATIONAL UNION OF CONSUMERS”

NGO “Development Agency “Urban City”

NGO “Agency of Local Initiatives”

NGO “Strong People of Donbas”

Festival Agency “Town Hall”

Bureau of Social and Political Development

Charity Organization “100 Percent of Life Rivne Network”

NGO “Laboratory of Democratic Transformations”

NGO “Women’s Anti-Corruption Movement”

Charity Organization “Berezan Community Foundation”

NGO “Question Mark”

NGO “Molod-DIYE”

NGO Center “Women’s Prospects”

Association of Ukrainian Fish and Seafood Importers

Chernihiv Civic Committee for Protection of Human Rights

NGO “After Silence”

NGO “Humanitarian Center”

Association of Franchising Employers

Civic Association “Ukrainian Capital Markets Association” (UCMA)”

NGO “Social Youth Group “Phoenix”

Kherson City NGO “Steve Jobs Center for Promotion of Information Technologies”

NGO “Creative Association “Night at University”

NGO “Academic Center “Science and Education”

Fund “Creative Initiative”

NGO “Veles+”

NGO “Steps to Future”

Community Development Fund “Edynyi Poryv”

NGO “IUS”

NGO “Spectr Kharkiv”

NGO “Country of Free Community”

NGO “Women’s Hub”

NGO “Bilozerka Regional Development Center”

NGO “Academy of Social and Economic Initiatives”

Center for Civil Liberties

NGO “Feminist Workshop”

Civil Network OPORA

NGO “Free Development Agency”

All-Ukrainian League of Lawyers Against Corruption

NGO “Territory of New Changes”

NGO “FOUNDATIONS OF CONSCIOUSNESS”

NGO “Spilno HUB”

NGO “Crisis Media Center “Siverskyi Donets”

NGO “Chornobyl Winners”

All-Ukrainian NGO “Fumigation Association”

Civic Association “AUVLP”

Association of Ukrainian Fish and Seafood Importers

Law and Democracy Foundation

All-Ukrainian NGO “Ukrainian Union of Fire and Technogenic Safety”

International Embassy of Women Entrepreneurs

Volyn Regional NGO “Volyn Press Club”

NGO “Art Center “Art-Space”

NGO “Center for Reforms, Democracy and Law”

NGO “Mexican Cultural Center “Estrella”

Primorsky District Organization of Veterans of Ukraine

Civic Association “Civic Control Acts”

NGO “Unity of Virtues”

NGO “Development Fund of Kakhovka Community”

NGO “Bar City Art Amateur Theater”

Kharkiv Regional Foundation “Civic Alternative”

NGO “Creative Initiatives Agency “More”

NGO “Kultprozhektor”

NGO “Ukrainian Order”

Charity Organization “Hope”

NGO “Resource Development Center “Community”

NGO “Federation of Convergent Pedagogy”

NGO “Communication Center “Palms”

Bukovyna Women’s Union

NGO “National Defense”

Public Service of Podillia

NGO “Cultural Agency A”

NGO “Ukrainian Expert League”

NGO “Lokator-Media”

All-Ukrainian Civic Association “Union of Hairdressers of Ukraine”

Charity Organization “Charity Fund for Implementation of Ideas”

Civic Association “Association of Civil Society Organizations of Luhansk Region”

NGO “WOMEN’S HUMAN RIGHTS PROTECTION GROUP”

NGO “Dia-Svit”

NGO “Novochervonianka”

NGO “Gender Club of Dnipro”

NGO “World for All”

NGO “Parallel 50”

NGO “Magic Runes”

NGO “Heritage!”

Civic Association Environmental Association Ecosystem

NGO “Privacy Hub”

Khmelnytskyi Regional Society of All-Ukrainian Organization of Persons with Disabilities “Union of Organizations of Persons with Disabilities of Ukraine”