The General Administration of the Treasury of the Belgian FPS Finance (the Treasury) has recently instigated the removal of 20,795 entities from the Crossroads Bank for Enterprises (CBE) over failure to comply with the legal obligation to register or refresh information on their Ultimate Beneficial Owners (UBOs) in the Belgian UBO register.
Through a law of 5 November 2023, which came into effect on 21 December 2023, the CBE is authorised to ex officio strike off such entities upon receiving information from the Treasury that the entities failed to comply with their obligation to:
- register adequate, accurate and up-to-date information in the UBO register as required under article 1:35 of the Belgian Code on Companies and Associations (CCA) after 60 calendar days have passed following the levy of an administrative fine over such failure;
- register adequate, accurate and up-to-date information in the UBO register as required under article 1:35 of the CCA in addition to not publishing any information in the (Annexes to the) Belgian State Gazette for the last seven years; or
- refresh the information in the UBO register on an annual basis, since at least one year.
The authorities have not hesitated to bring their new powers to immediate use. The Belgian State Gazette in February and March 2024 published the removal of almost 21,000 entities from the CBE. In addition, the Treasury on its website (Dutch / French) announced that over 8,000 other entities will be struck-off from the CBE in a second phase.
Consequences of a strike-off
A strike-off from the CBE does not affect the entity’s legal existence as such or bring about its liquidation or dissolution. The entity remains subject to its applicable legal, accounting, tax and social security obligations.
However, the deletion will severely impact the entity’s operations and reputation, i.a. because:
- the entity is no longer allowed to carry out any economic activity, and failure to comply with this prohibition may give rise to criminal sanctions;
- the entity can no longer initiate court proceedings; and
- the strike-off over the above UBO registration failures is made public, through publication in the Belgian State Gazette and the CBE.
The Treasury on its website indicates that, following strike-off, an entity’s operations and interactions with third parties, including banks, may be impeded or fully interrupted. The measure will i.a. block onboarding and ongoing monitoring processes by financial institutions and other service providers subject to anti-money laundering obligations.
The CBE is required to revoke the removal when, further to information by the Treasury, the above criteria are no longer met or when a manifest error is established by an authority or administrative department.
Only dormant and ghost entities?
According to the Treasury, the strike-off operation is aimed to combat dormant or ghost entities and spur non-compliant entities to register their UBOs. However, it appears that the list of removed entities also includes active companies with significant operations and a relatively high number of employees.
This suggests that the operation may have been of an automated nature instead of being based on an individual assessment of the concerned entities. It raises the question as to the proportionality of the sanction for non-compliance with UBO obligations, in particular in case of active companies. Also, entities may want to assess the possibility of legal action for damages or losses incurred as a result of the strike-off.
Takeaways
This new initiative by the authorities highlights the importance of collecting and timely registering UBO information and keeping such information up to date in accordance with the applicable rules. In addition to the existing administrative and criminal fines that could already be imposed on the directors of non-compliant entities, these entities could now be put on non-active, and the authorities have demonstrated that they are effectively using that stick.
Entities subject to these obligations, including all Belgian companies and associations, are therefore recommended to verify and further monitor compliance with their UBO obligations.
