Regulations of Law 10/2010 of April 28, on anti-money laundering and terrorist financing (AML-TF) (in force since May 6, 2014) requires directors of legal entities to know who the beneficial owner is.

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Directors must know who the beneficial
owner of the legal entity they represent is
The obligation to know who the Entity’s beneficial owner is
Until recently, directors did not necessarily know who were the owners / had control of
the legal entities they managed.
When they were requested to provide such information in order to fulfill anti-money
laundering requirements, one could get all kind of answers,, some were aware of this,
but clearly expressed they would not disclose that information and others, in their
ignorance, indicated it was beyond their reach, or that it was not achievable, or
simply refused to get it, etc.
Regulations of Law 10/2010 of April 28, on anti-money laundering and terrorist
financing (AML-TF) (in force since May 6, 2014) requires directors of legal entities to
know who the beneficial owner is. In particular, Article 9.1 states:
"... Company directors or other legal entities shall obtain and maintain
adequate, accurate and updated information on the beneficial ownership of
the same"
In fact, this information on the beneficial owner of the legal entities will be needed in a
wide variety of circumstances in which they will be required to disclose it:
- At the Notary’s: Director can no longer express their ignorance on this subject, that is,
directors must identify the beneficial owner (if any) or, otherwise, they will be deemed
to be the beneficial owners of the company.
- When hiring tax and legal services, accounting, audit, etc. in which case they need
to state and declare who the beneficial owner is.
- At the financial entities they work with, who will require them such a statement /
declaration disclosing the ultimate beneficial owner.

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Failure to comply with the obligation
This provision of the new AML-TF Regulations should not be disregarded, because the
adverse implications for the Directors of non-compliance can be quite important,
either because they commit any of the criminal offenses classified as document
forgery in Articles 390 et seq. of the Spanish Criminal Code, or because the non-
compliance may involve concealing the beneficial owner whose operations in the
future, can be detected and found a criminal offense, too.
At this point, directors of companies and other legal entities should remind that
beneficial owners do not necessarily have to be drug dealers to commit a criminal
offense. An accusation for tax fraud committed by the beneficial owner would be
enough for a director who failed to fulfill its obligation to face serious charges.
It should also be noted that Directors & Officers liability insurance (D&O) may not
cover liabilities arising from the failure to comply with this obligation, and it should be
noted that in general Directors are directly and personally liable for the damages
caused by their misconduct.
Common practical problems
It is not always easy for directors to identify who the company’s beneficial owner are.
There are different types of difficulties:
Due to the type of company or legal entity: e.g. companies that have issued
bearer shares.
Due to the type of owners of the company or legal entity: in particular when
companies/legal entities have no legal equivalent in national legislation
generating problems requiring an in-depth understanding of the legal
concepts and structures of ownership and control of such entities (e.g. trusts).

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Due to the ownership structure of the company, in particular when holders are
also legal entities and it is difficult not only to identify the percentage of equity
stake, but the actual majority control.
Due to the attitude of the owners: when they are unwilling or reluctant to
disclose the actual structure of ownership and / or control to the directors (e.g.
in case of certain confidential shareholders’ agreements, or family-owned
companies, etc.)
Difficulty to identifying the beneficial owner can no longer be an excuse for directors,
who must face it with the duty of care that is required to them, and adopt, as the
case may be, the relevant decisions, even if this may be difficult.
This document contains general information and may not be used as legal advice or professional
opinion. Amber Legal & Business Advisors makes available our team of attorneys to you, for any
clarification or advice, through our ordinary communication channels. You can also contact us at
info@amberbas.com.
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