This article by Antoine Druetz, Valérie Havaux, and Léa Cartier from EY Law helps Association leaders understand the critical implications of Belgium’s UBO obligations. It provides valuable insights on how non-compliance can lead to being struck off from the Crossroads Bank for Enterprises (CBE) and offers practical guidance for ensuring compliance.
In an effort to enhance transparency and combat financial crimes, Belgian law[1] has introduced a new administrative sanction for non-compliance with the Ultimate Beneficial Owner (hereafter: “UBO”) formalities. Since the end of 2023, any Belgian entity which does not conform to the UBO formalities is at risk of being automatically radiated/struck off from the Crossroads Bank for Enterprises (hereafter: “CBE”). This measure is part of a broader initiative to align with the European Union's Fourth and Fifth Anti-Money Laundering Directives[2], which aim to prevent money laundering and terrorist financing.
The impact is not to be underestimated – since January 2024, the General Administration of Treasury of the FPS Finance has already struck off more than 21,000 ghost or dormant entities from the CBE, mainly due to non-compliance with UBO formalities.
This article investigates the implications of these stricter measures and offers guidance for non-profit organisations (hereafter: “NPOs”) to remain compliant.
I. The UBO formalities
The UBO refers to the natural person(s) who ultimately own(s) or control(s) a legal entity. Under Belgian law, legal entities are required to identify their UBO(s) and register this information with the Belgian UBO Register, managed by the FPS Finance. The UBO formalities include providing accurate and up-to-date information on the identity of the UBOs, their interest in the entity, and the nature of their control. For NPOs, the persons that must be registered in the UBO register are typically the members of the Board of Directors and the person entrusted with the daily management. Furthermore, the UBO registration needs to be reviewed and updated (i) following each change (e.g. changes in the Board of Directors or the daily management) and (ii) at least once a year (even if no changes occurred).
II. New striking off procedure
Even though the UBO obligations are strict and financial sanctions apply for non-compliance (i.e. fines from 250 EUR up to 50,000 EUR), many Belgian entities still do not or not correctly fulfil those obligations. As a consequence, the CBE is now authorized to strike off entities ex officio (i.e. without procedure or motivation) for non-compliance with the UBO formalities and/or the yearly filing of the annual accounts.
The ex-officio striking off applies to NPOs which:
Fail to comply with the obligation to transmit information to the UBO register at least 60 calendar days after an administrative fine was already imposed to them;
Fail to comply for at least 1 year with the annual obligation to update or confirm the information registered in the UBO register; and/or
Fail to comply with the obligation to transmit information to the UBO register and fail to carry out any publications in the Annexes to the Belgian Official Gazette for the past 7 years (i.e. dormant entities).
III. Consequences
The ex officio striking off is a purely administrative strike off and will not have an impact on the existence or legal personality of the entity concerned. The strike off will however have important consequences with respect to:
The activities which can be carried out by the entity (which can no longer be carried out under the risk of considerable financial fines);
The reputation and contractual relationships of the entity with third parties, such as financial institutions (as the strike off will be publicly visible in the CBE); and
The possibility of the entity to initiate legal proceedings (as they will be declared automatically inadmissible for as long as the entity remains struck off in the CBE).
IV. Ensuring compliance
Taking into account that the implications of being struck off from the CBE can be very severe, it is crucial for entities to take proactive measures to ensure compliance with UBO formalities.
In order to avoid being struck off, NPOs should, amongst others:
Perform a thorough identification and registration of their UBOs;
Follow up on the legal deadlines and update on a regular basis (and at least once a year) their UBO register; and
Consult with legal experts for advice on compliance and to address any uncertainties regarding UBO identification.
Furthermore, any changes in the Board of Directors or the persons entrusted with daily management must be published in the Annexes to the Belgian Official Gazette (within 30 calendar days after the adoption of the decisions). The clerk’s office, upon filing of the publication forms, will update the CBE, which will allow the NPO concerned to proceed with the required update of its UBO register.
Practice showed that the update of the UBO register triggers a reaction from the authorities who will lift up the strike off from the CBE. The ex officio striking off is therefore not a definitive sanction and can be undone through regularisation of the required formalities.
V. Conclusion
The new ex officio strike off procedure emphasizes the importance of compliance with the Belgian UBO formalities. NPOs are required to take effective and immediate steps to ensure their compliance with (i) filing and publication formalities in the Annexes to the Belgian Official Gazette and (ii) UBO formalities, in order to avoid severe consequences (including financial and reputational damage).
If you have any questions or concerns related to non-profit law, Antoine Druetz, Partner, and his team will gladly assist your organisation.
[1] Belgian Act of 5 November 2023 containing various provisions on the economy.
[2] Directive (EU) 2015/849 and Directive (EU) 2018/843 of the European Parliament and of the Council.
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