24/11/22

GLOBAL REGULATION: Landmark CJEU case finds beneficial-ownership rules invalid.

As published on lawsociety.ie, Thursday 24 November, 2022.

The EU’s top court has found that the general public’s access to information on the beneficial ownership of companies constitutes “a serious interference with the fundamental rights to respect for private life, and to the protection of personal data”.

The Court of Justice of the European Union (CJEU) ruled that such a provision of an EU directive on money-laundering was invalid, and incompatible with the EU’s Charter of Fundamental Rights.

The directive requires member states to ensure that information on ownership of entities incorporated within their territory is accessible in all cases to members of the public.

The court said the EU’s aim to prevent money-laundering and the financing of terrorism was “an objective of general interest”, and that interferences with fundamental rights could be justified.

It added, however, that the interference entailed by the measure on beneficial ownership was “neither limited to what is strictly necessary nor proportionate to the objective pursued”.

‘Public’ not defined
The court said that the directive’s provisions allowed for data to be made available to a ‘public’ that was not sufficiently defined and identifiable.

The judges stated that the new rules amounted to “considerably more serious” interference compared with the previous rules, which provided for access to such information by competent authorities and certain entities, and by any person or organisation capable of demonstrating a legitimate interest.

The ruling followed a referral from the Luxembourg District Court, which asked the CJEU for a preliminary ruling on the issue.

Lawyers at Mason Hayes & Curran LLP (MHC) described the judgment as “landmark”, saying that it had put public access to information about company ownership and control into doubt.

The lawyers added that the judgment also had potentially wider ramifications, pointing out that the registers of beneficial ownership were not the only registers that Irish companies had to keep.

“All companies must also keep registers of their members, their directors, their secretaries, and the interests of directors and secretaries (and their families) in company shares and bonds.

“These registers contain names and home addresses of directors and secretaries, and in many cases, those of shareholders.

“Not only is access required, but companies must provide copies of this information on payment of a modest fee. Much of this information is then publicly filed in the Companies Registration Office (CRO),” MHC said.

MHC partner and solicitor Nick Metcalfe described the ruling as “a wake-up call” for policy-makers.

“For several years company law and information law have been on diverging tracks, each disregarding the other,” he said.

“For example, Irish law, which is supposed to allow directors’ home addresses to be kept off the public record in cases of sensitive industries, is effectively inoperative.

“A start would be to look at the British model where for example an applicant for information must have a ‘proper purpose’,” he suggested.

BERMUDA: Financial Policy Coun…