Finding Beneficial Ownership in the Ukraine Corporate Registry
Kateryna Halenko and Kaitlin Martin
Finding Beneficial Ownership in the Ukraine Corporate Registry
Following the passage of a 2015 law, Ukrainian companies are now required to report beneficial owners. This puts Ukraine at the forefront of European countries integrating ultimate beneficial ownership disclosures into a publicly available corporate registry.
In a previous blog post, we described how the beneficial ownership information in the Ukraine Ministry of Justice registry can help investigators determine ownership of offshore companies.
This post looks at the requirements in the beneficial ownership law and how its passage has affected financial disclosures. We’ll also pull some Ukrainian corporate records and show how they report beneficial ownership.
What Does the Ukraine Corporate Registry Disclose?
As a result of the new law, Ukrainian companies now need to disclose their beneficial owners. The law defines this as any person who can “influence” or “control” the company either directly or through the company’s shareholders.
Legal definitions of beneficial ownership differ from region to region. Broadly, it means taking part in the benefits of ownership, regardless of what form the actual ownership takes. More often than not, this translates to having the ability to control the transactional activity of a business entity or asset. Therefore, the ultimate beneficial owner of a company must be a natural person—that is, an actual person and not another company. A more detailed explanation of beneficial ownership is located in the Sayari Knowledge Center.
Specifically for Ukraine, influence and control means having a 25 percent or greater stake in shareholding or voting rights, regardless of how many degrees of separation lie between the company and its beneficial owner.
For example, consider a Ukrainian company whose owner is a company in another jurisdiction, such as Cyprus. The owner of that Cyprus company is a British Virgin Islands company, under beneficial ownership of a Russian citizen. The Ukraine corporate registry would denote the Russian citizen as the beneficial owner.
Companies need to disclose the full name, citizenship, passport number, tax ID, and residential address of beneficial owners. The law also stipulates that, in the foreseeable future, the Ukraine corporate registry will be searchable by beneficial owner name.
As you may know from our previous blog post, the Ukraine corporate registry does not currently have this search function. However, we have enabled searching by beneficial owner name on the Sayari Search platform. The platform currently holds two copies of the Ukraine Corporate Registry from 2018 and 2019.
Searching by Beneficial Owner in the Ukraine Corporate Registry
To show how beneficial ownership reporting works under the 2015 law, we’ll need to look at some Ukraine corporate registry documents. As an example, we’ll search for Russian oligarch and Kremlin ally Oleg Deripaska.
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Deripaska along with several companies linked to him in April 2018. After Deripaska reduced his investment in three of the companies, OFAC removed them from the sanctions list in January 2019: En+ Group PLC, United Company Rusal PLC, and JSC EuroSibEnergo. Let’s see if we can confirm this divestment using the Ukraine corporate registry.
Searching for Deripaska in the Ukraine Corporate Registry
First, let’s take a look at the 2018 Ukraine corporate registry to confirm whether Deripaska was indeed the beneficial owner of any of these companies.
A query for Deripaska’s full name in Ukrainian (Дерипаска Олег Володимирович) yields several results.
One of the results is Rusal Avtomatizatsiya LLC. The record discloses two important pieces of information: the company’s direct shareholders and its beneficial owner, Oleg Deripaska (see Fig. 1).
According to the record, Deripaska is the beneficial owner of Rusal Avtomatizatsiya through his holdings in two intermediary companies (see Fig. 2):
One of the intermediaries, “Rusal Limited,” is actually Jersey-based “United Company Rusal PLC,” one of the three companies OFAC previously sanctioned. (The Ukraine corporate registry provided a different company name than the Treasury.)
The other shareholder, “United Company Rusal Alumina Limited,” is registered in Cyprus. It is a subsidiary of United Company Rusal PLC.
The 2019 Ukraine Corporate Registry
We now know that Deripaska was the beneficial owner of at least one of the entities that OFAC sanctioned in 2018. We can check the 2019 Ukraine business registry to see if there have been any changes.
Recall that in 2019 OFAC removed sanctions on three of the sanctioned entities. This included United Company Rusal PLC. OFAC cited partial divestment by Deripaska as the reason for lifting sanctions.
A search for Rusal Avtomatizatsiya in the 2019 Ukraine registry by its identification number (34375844) shows that the company changed its name to Chas IT LLC. United Company Rusal PLC and United Company Rusal Alumina Limited are still its shareholders. But Deripaska no longer appears as the beneficial owner.
In place of a beneficial owner, the record indicates that “no physical person owns 25 or more percent of the authorized capital” (see Fig. 3).
The absence of Deripaska’s name on the 2019 record indicates Deripaska’s partial divestment from United Company Rusal PLC.
It also shows the beneficial ownership law in action: Chas IT does not list any beneficial owners because, according to the record, no physical person holds 25 percent or more of shareholding or voting rights.
Potential Pitfalls of the Ukraine Law on Beneficial Ownership
As we have shown in this example and others, the Ukraine corporate registry is a great resource for tracking down beneficial ownership, thanks to the 2015 legislation. However, the registry has some disadvantages that may hinder the law’s full implementation.
Although companies are required to disclose changes to information in their incorporation documents within three days, they don’t always comply. This can cause significant delays in beneficial ownership disclosures.
Furthermore, while companies are required to disclose beneficial owners, there is no way for the Ukrainian authorities to ensure that companies are disclosing them accurately. This is especially true for offshore jurisdictions where this information isn’t publicly available.
It remains unclear whether the beneficial ownership law will improve financial transparency in practice.
More likely than not, oligarchs will find ways to hide beneficial ownership relationships by appointing nominee shareholders or by simply omitting beneficial ownership information on documents filed with the state registrar. The law’s efficacy will hinge on the state’s political will and capacity to ensure compliance.
Notwithstanding the law’s limitations, understanding its implications for reading Ukraine corporate records is vitally important for investigators, researchers, and reporters. With the right skills, analysts can uncover ownership and control links that would otherwise be hidden on first glance.
The public records data used to power this research is available through Sayari Search! If you’re curious how this data could drive insights for your team, please reach out here.
Image credit Sasha Maksymenko