A new procedure for notifying the Ministry of Justice of the discrepancies in ultimate beneficial owner (UBO) information and ownership structure came into force as of 1 September 2024. The new rules follow a Decree of the Ministry of Justice No. 2542/5 (dated 12 July 2023).

Details

Under the new rules, primary financial monitoring entities (PFMEs) — among them, financial service providers, payment system operators, as well as audit, accounting, tax and legal service providers (including notaries) — must report any inconsistencies between the UBO and ownership structure information recorded in the Ukrainian Company Register and their audit findings. When a PFME provides notice of an inconsistency:

• The Ministry of Justice informs the state registrar (without revealing the PFME's identity) within 10 business days.
• The state registrar, within three business days, enters a note in the Ukrainian Company Register indicating potential data unreliability and sends a request to the legal entity.
• The legal entity should provide explanations and supporting documents to the state registrar for verification and further inspection if needed.

In the course of the further inspection, the registrar is authorized to request relevant information from individuals and legal entities, obtain copies of necessary documents, access the legal entity's premises, and inspect records and items at its location.

Failure to provide explanations or update inaccurate information may lead to complete removal of UBO and ownership structure information from the register because the information could be unreliable, which could negatively affect the legal entity's corporate compliance and, potentially, its operations. This, in turn, could hinder its ability to cooperate with financial institutions and counterparties.

Formally, noncompliance with these requirements may lead to fines ranging from approximately US$400 to US$8,000, depending on, among other things, on the nature of the violation and the entity's culpability.

However, during martial law in Ukraine and for three months after martial law ends, administrative liability for failing to update UBO and ownership structure information does not apply, providing a temporary exemption.

Implications

• Compliance requirement: Businesses must ensure that their UBO and ownership structure information data remains accurate and up to date and note that the requirements relate to both Ukrainian legal entities and branches of foreign entities in Ukraine.

• Reputational risk: Failure to maintain accurate UBO and ownership structure information data can pose reputational risk in that having a note of potential inaccuracy in the Ukraine Company Register, or complete deletion from the register of such information, may affect business relations with banks and other counterparties.

Further, administrative fines apply for failing to update the UBO and ownership structure information. Although enforcement is suspended during martial law and for three months after its conclusion, affected entities should eliminate inaccuracies without delay.