On August 25, 2020, the Law No. 1035, Reform Law to Law No. 698, Public Registries General Law and the Commercial Code of the Republic of Nicaragua was published in The Gazette Number 158; these reforms have the purpose of creating the Final Beneficiary Registry of Mercantile Companies, which will be governed by a Regulation that will be issued by the Registry Special Commission and it will become part of the National Registry System of Nicaragua.
Regarding the creation of this new Registry, it is necessary to know that this reform was born in response to the recommendations made to Nicaragua by the Financial Action Task Force (FATF), through the International Co-operation Review Group (ICRG) in the context of prevention of money laundering, who urged our country to:
“Develop concrete actions to prevent Commercial Companies from being used or instrumentalized for ML activities, indicating that they must have adequate, timely and updated information that allows to effectively determine who is the Final Beneficiary (FB) of legal entities, having to understand as such, the natural person (s) who ultimately have ownership or control of a company ”.
As our country is a member of the FATF, it is important to follow its guidelines and it is intended that Nicaragua leave the “Gray” list of this international organization; that is to say, it is created in order to guarantee the international community that companies operating in Nicaragua are not used to cover up illegal activities.
Being clear about the origin of the reforms, we can affirm that its impact is summarized as follows:
– The Final Beneficiary Registry will be a private registry.
– The Final Beneficiary Registry will be national.
– The Final Beneficiary Registry will operate online.
– In the reforms, it is explicitly established that the integrity, confidentiality, traceability and security of the data in custody will be ensured in accordance with generally accepted international standards in data management and protection.
– Only the interested mercantile companies (through the person named for this purpose), the competent authorities and relevant institutions will have access to the information of the final beneficiary.
The companies that are not registered in the Final Beneficiary Registry, in addition to the sanctions that the specific regulations will contain, will be subject to the following administrative sanctions:
– They will not be able to enter any document in the registry, nor take advantage of its legal effects.
– The judges will not process the demands of subjects that having to be registered, do not attach the corresponding certification.
In addition to the mandatory registration, companies have the obligation to keep the information of the final beneficiary updated in the times established in the Regulations, in that sense the reforms establish that they must register:
“Changes in the shareholding, participation or ownership, control structure of commercial companies and their legal representatives; as well as any change that modifies the identification and updating of the information on the Final Beneficiary of the Commercial Companies ”(Article 156, 2).
This means that any change in the shareholding must be registered and also supported with the corresponding documents since in a complementary manner, the law specifies that when within a commercial company other national or foreign commercial companies appear as partners, a certified copy of the Articles of Incorporation and its Bylaws, Updated Registration Certificate and Updated Shareholding Certificate, all these documents with their respective authentication or apostille as the case may be, must be attached.
Finally, it is necessary to mention that the opening of the Final Beneficiary Registry and the programming of the registration cycles will be done when the National Registry Directorate publishes the Specific Regulations and consequently, Commercial Companies are not obliged to make or send any type of report in regard with the Final Beneficiary to the registry offices, this was provided by the National Registry Directorate in an Informative Circular dated August twenty-four of the year two thousand and twenty.
By virtue of these reforms, it is recommended that all commercial companies in Nicaragua organize all the documentation related to their shareholding composition, so that once the aforementioned Regulations are approved and the Registry begins to operate, they can register promptly so that they are not subject to the aforementioned sanctions and their commercial activity will not hindered.