Can Corporate Transparency Coexist with Individual Protection? Cyprus's New Approach to Beneficial Ownership: A Critical Analysis of Law N.141(I)/2024
Angelina Alyabyeva, Author
On 6th of December 2024, Cyprus enacted Law N.141(I)/2024, introducing substantial reforms to its Ultimate Beneficial Ownership (UBO) Registry framework. These amendments fundamentally alter the compliance landscape for companies operating in Cyprus, particularly in areas of liability distribution and enforcement mechanisms.
Key Legislative Changes
Restructured Liability Framework
Law N.141(I)/2024 introduces a fundamental shift in how liability is attributed for non-compliance with UBO reporting requirements. The new framework explicitly restricts financial penalties to the company or legal entity that fails to fulfill its reporting obligations. This marks a significant departure from the previous regime, where directors and secretaries faced direct financial penalties. The amendment recognizes the corporate veil while maintaining individual accountability through alternative mechanisms.
Under the new provisions, directors and secretaries are no longer directly liable for financial penalties. However, the law maintains their responsibility through a nuanced approach: when a director or secretary is deemed jointly liable with the company, they become responsible for their proportionate share of any financial penalty imposed on the entity. This approach balances the need for individual accountability with the principle of corporate personality.
Modified Penalty Structure
The reformed penalty system introduces a more sophisticated and proportionate approach to enforcement. Financial penalties now follow a tiered structure, beginning with a €100 penalty for the first day of non-compliance, followed by €50 for each subsequent day of violation. The law caps the total penalty at €5,000 per company or legal entity, creating a clear upper limit that provides certainty for businesses while maintaining deterrent effect.
This graduated approach represents a more nuanced understanding of compliance challenges. The initial penalty serves as a warning mechanism, while the daily increment encourages swift remediation. The maximum cap acknowledges that excessive penalties may be counterproductive and ensures proportionality in enforcement.
Enhanced Administrative Powers
The legislation significantly expands the Registrar of Companies' authority through several key provisions. First, the Registrar now holds the power to issue Guidelines (KΔΠ) establishing administrative review procedures. This authority extends to creating and overseeing processes for examining appeals against financial penalty decisions, ensuring a structured approach to dispute resolution.
A particularly significant addition is the Registrar's power to remove non-compliant entities from the business registry. This ultimate sanction provides a powerful incentive for compliance while maintaining the integrity of the registry. Furthermore, the Registrar can now seek court orders to enforce compliance with obligations under Article 61A of Law 188(I)/2007, adding judicial backing to administrative enforcement efforts.
Implementation Timeline and Transition Provisions
The legislation establishes a clear timeline for implementation while providing reasonable accommodation for transition. All companies and legal entities have until January 31, 2025, to ensure compliance with UBO reporting requirements. This extended deadline acknowledges the practical challenges of implementing new compliance procedures while maintaining regulatory pressure for timely adoption.
The issuance of Directive KΔΠ123/2024 on December 16, 2024, provides crucial implementation guidance. The directive details specific procedures and requirements, offering clarity to businesses and their advisors. Additionally, the framework includes an extended processing period for 2024 verifications until March 31, 2025, allowing for systematic implementation of the new requirements.
Enforcement Mechanisms and Compliance Procedures
The new framework establishes comprehensive procedures for both compliance and enforcement. At the heart of the system lies the mandatory electronic registry (https://ubo.meci.gov.cy), which serves as the exclusive platform for UBO information submission and updates. This digital-first approach streamlines the submission process while enhancing data accuracy and accessibility.
The legislation also addresses historical penalties through a structured refund system. For payments made through JCC, refunds will be processed automatically to the original payment cards. Treasury payments require submission of form KE1, accompanied by specific documentation including FIMAS payment verification and photocopies of payment justification documents.
Conclusion
Law N.141(I)/2024 represents a significant maturation of Cyprus's approach to beneficial ownership transparency. The amendments demonstrate a sophisticated understanding of the balance required between effective enforcement and practical business operations. The success of these reforms will depend on consistent application by regulatory authorities and proactive compliance by business entities. As the January 31, 2025 deadline approaches, businesses operating in Cyprus must carefully evaluate their compliance procedures and make necessary adjustments to meet the new requirements.
References
Law N.141(I)/2024 of the Republic of Cyprus
Directive KΔΠ123/2024, issuedDecember 16, 2024
Prevention and Suppression of Money Laundering Activities Law 188(I)/2007
EU Anti-Money Laundering Directive (EU) 2015/849
EU Directive (EU) 2018/843 (5th Anti-Money Laundering Directive)
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