The beneficial owner is the individual or entity that enjoys the benefits of owning an asset, regardless of whose name the title of the property or security is in.
In Art. 8 of the Regulation of Law 10/2010 of 28 April, the general rules of beneficial ownership are outlined.
According to this, beneficial owners are:
- Natural persons on whose behalf the legal entity is established or a transaction of funds made. This means, for example, the person who can prompt a business relationship or a transaction.
- The persons who control (directly or indirectly) or own more than 25%. This person is seen as one who can control the entity. Control or ownership is meant in regards to share capital or voting rights.
- If there is no person who fits into the aforementioned categories, the administrator is seen as the beneficial owner. If the administrator, in turn, is a legal person, the natural person appointed by it is the beneficial owner.
- The persons ultimately responsible for direction and management (even through a chain of control).
Example 1: An Association has a representative body consisting of three members with voting rights percentages of 20%, 40%, and 40%. The two members with 40% of the voting rights are beneficial owners.
Example 2: The representative body has five members with 20% of voting rights each. All five members are beneficial owners. If there are no members of the representative body with more than 25%, all members will be recognized as beneficial owners.
Furthermore, there can be agreements or statutory provisions that determine who the beneficial owners are apart from the aforementioned rules.
Example: The board of a foundation consists of three members, two of which own 25% of the voting rights, one owns 50%. The member with 50% of the voting rights is the only beneficial owner.
In a foundation, similarly to an Association, the beneficial ownership is determined by percentages of voting rights on the board. The board decides who profits from the foundation and who receives money; therefore, the control lies ultimately with the members of the board, especially those with a significant voting percentage. The beneficial owners are, in this case, those who have more than 25% of the voting rights.
As with associations, if there are no members with more than 25% of voting rights, all members of the board are beneficial owners. The beneficial ownership as usual can also be decided by agreements or statutory provisions.
- A person established a trust for somebody else. The beneficiary is not yet in control of the trust. The establisher of the trust is the beneficial owner.
- A trust is established, and the beneficiary has control of it. The beneficiary is the beneficial owner. Beneficial ownership lies with the person who ultimately directs and manages funds and transactions. Control of the funds is in this case more relevant than the initial providing of funds.
As with Associations and foundations, any person who controls or owns more than 25% is a beneficial owner. In this context, "Control" means the right to appoint the majority of the directors or to control the management or policy decisions, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements. If no person owns more than 25%, the members of the board or the managing director are beneficial owners.
Subsidiary limited company
Example: A company listed on the stock market has a subsidiary limited company. The mother company holds 70% of shares, another company which is not listed owns 30%. The natural person of the company holding 30% is the beneficial owner.
Listed companies do not have beneficial owners. If there is another person owning more than 25% of the subsidiary limited company, they are the beneficial owner.
Example 1: A natural person owns 60% of the shares of a company which is a partner with 50% of shares in a partnership. The person is a beneficial owner because they have the majority of control of the company and therefore control over the shares in the partnership. The shares in the partnership, in turn, are more than 25%.
Example 2: A natural person owns 30% of a company which in turn controls 50% of a partnership. The natural person is not a beneficial owner because they do not own the majority of the company and cannot control the voting rights or shares in the partnership.
Example: A natural person buys stock through a brokerage firm. The natural person is the beneficial owner. Even though the stock is registered in the firm's name, the natural person is the one in control of the stock.