Who's pulling the strings?

I'm a young entrepreneur with limited financial resources. I have convinced an investor who wishes to remain discreet to follow me in my project. So he often invests through his companies. A lawyer friend of mine is now talking to me about transparency, beneficial ownership and the obligation to disclose. What do I need to do to comply?

E., Versoix

You are required to identify each individual who actually controls your company. The new law on the transparency of legal entities (LTPM), is aimed precisely at preventing a company from acting as a screen between the authorities and the person who actually runs it. Its aim is to guarantee rapid access to accurate, complete and up-to-date information on beneficial owners, in particular to fight against whitening, organised crime and financing of terrorism. This law applies in particular to public limited companies, limited liability companies, cooperatives, certain investment companies and certain foreign legal entities with links to Switzerland.

Who is the beneficial owner?

The central concept is that of’beneficial owner (ADE). In the case of a company, this means anyone who holds or last controlled at least 25% of the capital or votes, directly or indirectly, or who otherwise controls the company (art. 4 LTPM). If no natural person can be identified according to these criteria, the most senior member of the management body is deemed to be the beneficial owner.

In concrete terms, the company will have to identify its ADEs, verify their identity with the relevant documents, keep the information in Switzerland and then register them with the Federal Transparency Register (art. 7 to 9 LTPM). In the case of a new company, the notification must be made within one month of registration in the Trade register. Any changes must also be announced within one month of becoming aware of them. For companies already in existence at the time of entry into force, there will be a transitional period of up to two years to comply with the new legal requirements.

It is therefore perfectly possible for your investor to support you through his companies, but this should not prevent you from identifying the natural person who ultimately controls the shareholding or influence exercised over your company.

This transparency is not just administrative. The Act provides for a fine of up to CHF 500,000 in the event of an intentional breach of the reporting or cooperation obligations (art. 43 of the Act).

In conclusion, your project is not compromised by the fact that your investor is acting through companies. But discretion now has a clear limit. Behind every legal entity, you have to be able to trace it back to a specific individual. Swiss law does not require you to shout this out in public, but the authorities do want to know who is behind the curtain...

Read Pascal Rytz's columns on Tribune de Genève