Foremost, it should be noted that on April 28, 2020, the Law of Ukraine “On the Prevention and Counteraction of the Legalization (Laundering) of Proceeds from Crime, the Financing of Terrorism, and the Financing of the Proliferation of Weapons of Mass Destruction” entered into force. It introduced a number of obligations, including those related to the submission of information on ultimate beneficial owners (hereinafter referred to as UBOs) to the state registrar.
On December 29, 2022, Law of Ukraine No. 2571-IX dated September 6, 2022, introduced a number of amendments to the above-mentioned regulation, the most significant of which was the exemption from the obligation to annually confirm UBO information. However, maintaining up-to-date UBO information and ownership structure is still necessary, and furthermore, penalties for failure to submit or inaccurate submission of UBO information by a legal entity have been increased.
What is an Ultimate Beneficiary?
Under Ukrainian law, an ultimate beneficiary (beneficial owner) is a natural person who, regardless of formal ownership structure, ultimately owns, controls, or derives economic benefit from a legal entity. This definition is established by the Law of Ukraine “On Prevention and Counteraction to Legalization (Laundering) of Proceeds from Crime, Financing of Terrorism and Financing of Proliferation of Weapons of Mass Destruction.”
The concept goes beyond registered shareholders to identify the real individuals behind corporate structures, trusts, or nominee arrangements who exercise actual control or receive financial benefits.
Criteria for Identifying the Ultimate Beneficiary
Ukrainian law establishes several criteria for determining who qualifies as an ultimate beneficiary:
Direct or Indirect Ownership
A natural person who directly or indirectly owns more than 25% of the authorized capital or voting rights in a legal entity is considered an ultimate beneficiary. Indirect ownership is calculated through chains of corporate entities, including offshore structures.
Control Through Other Means
Even without the 25% ownership threshold, a person may be deemed an ultimate beneficiary if they exercise decisive influence over the company’s management or business decisions through:
- Voting agreements or shareholder pacts
- Family or business relationships with formal owners
- Appointment rights for executive bodies or board members
- Veto powers over strategic decisions
Economic Benefit
The ultimate beneficiary is the person who ultimately receives economic benefits from the company’s activities, regardless of formal ownership arrangements. This includes profits, dividends, or asset distributions that flow through intermediary structures.
Legal Obligations for Companies
All Ukrainian legal entities and their foreign counterparts operating in Ukraine must:
- Identify and verify their ultimate beneficiaries through due diligence procedures
- Maintain up-to-date information about beneficial owners in internal records
- Submit beneficiary data to the Unified State Register of Legal Entities, Individual Entrepreneurs and Public Formations
- Update information within 30 days of any changes in beneficial ownership structure
Failure to identify or disclose ultimate beneficiaries can result in administrative fines, suspension of business activities, or criminal liability for company management.
Documentation Required
To determine and confirm the ultimate beneficiary, companies must collect and maintain:
- Passport copies and tax identification numbers of beneficial owners
- Corporate structure charts showing ownership chains
- Shareholders’ registers and founding documents
- Trust deeds, nominee agreements, or other control arrangements
- Powers of attorney and voting agreements
- Documents confirming the source of ownership or control
Special Cases and Exceptions
When No Individual Meets Criteria
If no natural person qualifies under the 25% ownership or control tests, the senior executive officer (director, CEO, or equivalent) is designated as the ultimate beneficiary by default.
Publicly Traded Companies
For companies listed on regulated stock exchanges, ultimate beneficiary identification requirements may be simplified, though significant shareholders above reporting thresholds must still be disclosed.
State-Owned Enterprises
The state itself is considered the ultimate beneficiary for fully state-owned entities, though senior management must be identified for partially state-owned companies with private shareholders.
Practical Steps for Compliance
Step 1: Map your complete ownership structure, including all intermediary entities and individual shareholders.
Step 2: Calculate direct and indirect ownership percentages for each natural person in the ownership chain.
Step 3: Identify individuals exercising control through non-ownership mechanisms (agreements, relationships, influence).
Step 4: Collect required documentation from identified ultimate beneficiaries.
Step 5: Submit beneficiary information to the State Register and maintain updated internal records.
Step 6: Review and update beneficiary data whenever ownership, control, or management changes occur.
Why Professional Assistance Matters
Determining ultimate beneficiaries in complex corporate structures—especially those involving offshore entities, trusts, or multi-layered holdings—requires thorough legal analysis. Incorrect identification or non-compliance with disclosure obligations exposes companies to regulatory penalties and reputational risks.
Legarithm’s corporate compliance team provides comprehensive support for ultimate beneficiary identification, documentation preparation, State Register filings, and ongoing compliance monitoring under Ukrainian law.
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