REGISTRY OF FINAL BENEFICIARY AND UPDATE OF BASIC INFORMATION OF COMMERCIAL COMPANIES (PART 1)

(First part)

Author:

Wendy Martinez

Associate Attorney

On August 20, 2020, Law No. 1035 “Reform Law to Law No. 698 "General Law of Public Registries" and the Commercial Code of the Republic of Nicaragua", published on August 25 of the same year in the Official Gazette.

Through this reform, the "Registro de Beneficiario Final de Sociedades Mercantiles" is created as a member of the National System of Public Registries (SINARE).

[1]The main objective of which will be to guarantee transparency regarding the information of the final beneficiary and the natural persons who exercise control of the national or foreign legal persons associated with a Nicaraguan company.

Posteriormente, en fecha veinticinco de noviembre del año dos mil veinte, se emitió la Normativa de Funcionamiento del Registro del Beneficiario Final de las Sociedades Mercantiles, donde se conceptualiza la figura del Beneficiario Final.

Who is the Final Beneficiary?

It will be understood as Final Beneficiary[2] a la persona o personas naturales en cuyo nombre se realiza una acción o tengan la propiedad y/o control de una sociedad; teniendo en cuenta los siguientes criterios:

• Ownership Criterion: The possession of a percentage equal to or greater than 25% of the share distribution of the company.
• Control Criterion: Possession of the legal instrument that empowers them to control the company. Example: General Representative of Administration or generalissimo, etc.
• Senior Administrative Position Criterion: The ability to make and impose relevant decisions within the company. Example: The President of the Board of Directors.

 When should I declare my final beneficiary?

In accordance with the reform and regulations, all commercial companies have the obligation to declare all the information related to the Final Beneficiary, a declaration that must be made in any of the following scenarios:

• Al momento de constitución y registro de una nueva Sociedad Mercantil.
• Within a period not exceeding thirty days after its registration in the Mercantile Registry of a new company, as long as said information has not been declared in the deed of incorporation.
• Mercantile Companies that are already registered on the date of publication of Law 1035, which must declare their information in the following cycles:

1. Companies whose corporate names begin with the letter A through H from April 19 to October 18 of the current year.
2. Companies whose company names begin with the letter I to Z from October 19 of the current to April 19, 2022.
3. Regardless of the established deadlines, commercial companies that wish to make their declaration and/or update before the start of a cycle may do so without any inconvenience.

Es importante mencionar que, para poder hacer el registro de beneficiario final de una sociedad, primero debe hacerse la actualización de información básica de esta.

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[1] Article 3, subsection 5 Law 1035, Reform Law to Law 698 General Law of Public Registries and the Commercial Code of the Republic of Nicaragua.

[1] Article 2.1, subparagraph b, Regulations for the Operation of the Registry of Final Beneficiary of Mercantile Companies.

BASIC INFORMATION UPDATE PROCESS

¿Qué es información básica de una Sociedad Mercantil?

The Regulations for the Operation of the Registry of the Final Beneficiary define "Basic Information" as all the information that the constitutive agreement of commercial companies must contain in accordance with the Commercial Code and declared in the Commercial Registry[1]. Both 1035 and the Regulations for the Operation of the Final Beneficiary Registry establish that this information must be updated both ordinarily (once a year) or extraordinary each time there is a change in it.

This process is done as follows:

1. Hold a general meeting of shareholders of the interested company, in which it is agreed to update basic information.
2. Submit the registration of the Notarization of the Minutes of the General Shareholders' Meeting where it is agreed to update the basic information of the company.
3. Cancel the corresponding tariffs.
4. Withdraw the duly registered documents.

PROCESS OF DECLARATION AND/OR UPDATE OF THE FINAL BENEFICIARY

Once the basic information of the company has been updated, the final beneficiary registration proceeds. The process of declaration and/or update of the Final Beneficiary is a practical, expedited and safe process, which will be carried out through a digital platform similar to the Registry of Movable Guarantees by the Legal Representative or by the person[2] that the mercantile society designates for this activity. This person must necessarily have the following faculties:

• Declare and update the information of the final beneficiary.
• Access the Final Beneficiary Registry through the web.
• Fill out forms corresponding to the basic information of the Mercantile Company regarding the Final Beneficiary.
• Fill out the declaration of the Final Beneficiary within the established term of the regulations,
• Attach the digital format of the Declaration of the Final Beneficiary and supporting documents, as well as the following procedures related to the registration of the Final Beneficiary.
• Request a business profile, file and process review and appeal resources, request the extension and suspension of the deadlines established in the Operating Regulations of the Final Beneficiary Registry.

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[1] Article 2.1, subparagraph k, Regulations for the Operation of the Registry of Final Beneficiary of Mercantile Companies.

[2] Article 2.1, subparagraph p, Regulations for the Operation of the Registry of Final Beneficiary of Mercantile Companies.

This process is done as follows:

1. Register the Special Power of Attorney in favor of the person who will be in charge of making the declaration.
2. Creation and activation of the authorized user account.
3. Activation of the Business Profile, which will be linked to the Denomination or Company Name that the authorized user represents.
4. Fill out the Declaration forms, which will contain specific data of the natural person designated as Final Beneficiary and the commercial company.
5. Selection of the identification criteria of the Final Beneficiary.
6. Validation of the information provided.
7. Presentation of the Final Beneficiary Declaration Certificate and obtaining the Unique and Perpetual Number declared as Final Beneficiary.
8. Payment quote for printing the Final Beneficiary Declaration Certificate.
9. Making the corresponding payment.
10. Issuance of the Certificate with its respective QR code and bar code, to which the corresponding tax stamp must be added.

The declaration and/or update of the Final Beneficiary may be ordinary and extraordinary; it being understood that the ordinary ones will be once every twelve months and extraordinary each time there is any change that modifies or reforms the constitutive agreement and determination of the identification of the Final Beneficiary.

As we can see, the declaration and/or updating of the Final Beneficiary and basic information processes were adapted to the digital reality in which we find ourselves today, making them much faster, more practical and easier for the general public. It will mainly represent the transparency and veracity of the information of each Nicaraguan commercial company.

It is worth mentioning that non-compliance with the above can have serious consequences. In a following article we will address these consequences in detail.