Ultimate beneficial owner, supreme legal entity and excercising control

Ultimate beneficial owner

The economic owner of a legal entity according to the meaning of the Austrian UBO Act is any natural person in whose property or under whose control a legal entity - such as a company, a foundation or a trust - ultimately stands. A legal entity may also have more than one ultimate beneficial owner, but a legal entity can never be an ultimate beneficial owner under the law.

The legal definition, who should be regarded as the ultimate beneficial owner, is also dependent on the respective legal form of the legal entity. While in a private foundation, for example, the founders, the members of the foundation board and the beneficiaries are usually regarded as beneficial owners. For associations the association board is defined by law as ultimate beneficial owner. As a general rule at least those natural persons are considered as ultimate beneficial owners who

  • hold a stake of more than 25% of the company
  • or
  • have a sufficient part of voting rights (more than 25 %)
  • or
  • exercise control over the management board of the company.

If an ultimate beneficial owner cannot be determined after exhausting all possibilities, the members of the top management level shall be registered as subsidiary ultimate beneficial owners.

In connection with the most numerous cases of application of the Austrian UBO Act, which are private companies and corporations, the law distinguishes between direct and indirect ultimate beneficial owners.

Direct ultimate beneficial owner

If a natural person holds a stake or voting share of more than 25% of a company, that individual is its direct beneficial owner.

Indirect ultimate beneficial owner

If a legal entity holds a stake or voting share of more than 25% of a company and a natural person exercises direct or indirect control over that entity, that natural person is the indirect beneficial owner of the company in question. If more than one entity, directly or indirectly controlled by the same natural person or individuals, holds a total of more than 25% of a stake or voting share of a company, this is also an indication of indirect beneficial ownership of that entity.

Supreme legal entity

By definition supreme legal entities are those entities within the shareholding chain that are directly controlled by indirect ultimate beneficial owners. Also those entities in which indirect ultimate beneficial owners directly hold stakes or voting shares are considered as supreme legal entities if they together with the aforementioned entities led to beneficial ownership.

Control

Holding a stake or voting share of more than 50%, held directly or indirectly, is defined as control. Furthermore, parent companies have also control over their subsidiaries if other criteria (according to § 244 UGB ) are applicable. Also, occupying various functions in foundations and trusts in a supreme legal entity establishes control. Furthermore, a trustor or a comparable person establishes control through the trust relationship or a comparable legal relationship.

Above the first level of participation, the definition of the beneficial owner is only aimed at the concept of control. Following the international understanding of the concept of control, therefore, an "active control" - thus a majority (more than 50%) of the shares or voting rights - of the interposed legal entity is necessary in order to be considered the beneficial owner within the meaning of the Austrian UBO Act in a multi-unit corporate structure.