Ultimate Beneficial Owners: Deadline and rules for this disclosure requirement

Companies in Brazil and abroad must disclose their UBOs to remain in good standing with the national legal entity registry

Aiming at aligning national standards with the recommendations set out by the Organization for Economic Cooperation and Development (OECD), Brazil has been adopting stricter rules to enhance corporate transparency and curb unlawful data concealment. One such measure requires businesses to identify and report information on their ultimate beneficial owners (UBOs).

This requirement is crucial for maintaining business compliance in the country. However, for legal entities engaged in various operations and possessing complex corporate structures, identifying the ultimate beneficial owners behind business activities can be a daunting task. Below, we highlight key aspects and rules that companies should keep in mind for maintaining compliance with this requirement.

What is an Ultimate Beneficial Owner?

According to the regulations issued by the Brazilian Federal Revenue Service, an ultimate beneficial owner (UBO) is any individual who owns, controls, or exercises significant influence over the entity, or on whose behalf a transaction is carried out.

It is important to note that this control does not have to be exercised directly. Even those who are not owners or partners can be considered ultimate beneficial owners if they profit from or make important decisions related to the business.

In this sense, individuals who own more than 25% of the company's share capital or voting rights, or who exercise a preponderance in deliberations and have the power to elect the majority of directors, are presumed to fall into this category.

Which companies are required to comply?

In Brazil

Disclosure of ultimate beneficial owners is a requirement that applies to entities based in Brazil, generally speaking.

In addition to companies at large, the following entities must provide this information:

• Domestic investment clubs and funds, as well as non-resident investors incorporated under the regulations of the Brazilian Securities Commission (CVM);
• Silent Partnerships (SCP) linked to the general partner.

Abroad

The requirement extends to a number of companies headquartered abroad that must be enrolled with the National Registry of Legal Entities (CNPJ) in Brazil.

It is worth noting that, depending on a company’s business activities, this registration should be carried out with the Federal Revenue Service (RFB), the Central Bank of Brazil (BACEN), or the Securities Commission (CVM).

Check out how the CNPJ registration should be performed for each entity required to report information on its ultimate beneficial owners:

Exceptions

It is important to note that some entities are exempt from this reporting requirement, either because their information is already presumed to be public or because, due to their specific characteristics, their most influential owners and partners are legally presumed to be the ultimate beneficial owners.

Examples include publicly traded companies, consortia of employers, sole entrepreneurs, and companies composed exclusively of individuals where at least one owner holds more than 25% of the shareholders’ capital.

How do you identify a company’s UBO?

Identifying a company’s ultimate beneficial owner (UBO) involves a thorough analysis of various corporate documents. The articles of association, for example, provide important information about the stakes held by each shareholder. It is also necessary to examine the shares on the stock exchange, as this can reveal majority shareholders who have effective control of the organization.

However, the process should be complemented by analyzing other registration, financial, and tax information. This includes monitoring transactions, loans, and financing, as well as queries in public registers.

Deadlines and penalties

Information on a company’s ultimate beneficial owners must be provided within 30 days of its registration with the CNPJ.  Entities with a tax domicile outside the country must report the existence or non-existence of UBOs. Companies based in Brazil only need to disclose this information if any of their individual members fall into this category.

Failure to comply will result in the suspension of the company's CNPJ, leading to serious consequences. This prevents banking transactions from being carried out, including activities involving checking accounts, financial investments, and the ability to obtain loans.

Corporate compliance

Domingues e Pinho Contadores supports domestic and foreign companies with the procedures related to reporting ultimate beneficial owners to the Brazilian Federal Revenue Service. We provide guidance on the rules and documents needed to comply with this requirement. For assistance, please contact us at:  dpc@dpc.com.br.