Legislative reform aimed at ensuring access to information on joint-stock companies

The package of draft Laws ''On making amendments and supplements to the Law "On state registration of legal persons, state record-registration of separated subdivisions, institutions of legal persons and individual entrepreneurs" and ''On making amendments to the Law 'On securities market’'' was posted by the Ministry of Justice on the unified website for publication of legal acts’ drafts (www.e-draft.am) for public discussion.

The amendments recommended by the drafts package are aimed at bringing the access to information on joint-stock companies into compliance with the access to information on limited liability companies, transferring to the State Register of the Legal Entities (hereinafter referred to as ''the Agency'') information on the shareholders of a joint-stock company and as a result, at making this information more accessible to the public.

The Agency records in the State Unified Register information on the participants of limited liability companies and fails to maintain a register for joint-stock companies. Meanwhile, both the joint-stock companies and the limited liability companies are of equal public interest. It should be noted that joint-stock companies often have a higher level of public interest by their volume of financial activities, since they participate in various public processes, including in the public procurement, render services, which are of key importance to the public. Therefore, the information thereon must be more transparent and accessible, the public must have the opportunity to obtain information on the shareholders of joint-stock companies, exercise public supervision over the public-private partnership, the process of public procurement, the economic competitive environment.

Ensuring access to information on the shareholders of joint-stock companies is also necessary in terms of prevention and disclosure of offences. The entry in the Unified State Register of information on the shareholders and its access allows to make the fight against corruption and money laundering more effective, to disclose unlawful influences on different joint-stock companies and, in general, to make the system more transparent.

The reforms recommended by draft Laws also create necessary grounds for introducing the institution of beneficial owners. With this regard, it should be noted that in the report on the Fourth Round of Monitoring of the Istanbul Anti-Corruption Action Plan for Economic Co-operation and Development (OECD) 2018, a recommendation[1] was issued to Armenia on taking steps aimed at introducing the institution of beneficial owners.

In accordance with Directive[2] (EU) No 2015/849 — fourth directive to address money laundering, all Member States of the European Union are obliged to obtain and maintain proportionate, accurate and up-to-date information on the beneficial owners of companies registered within their territory. The Member States are also obliged to ensure the existence of central register for the registration of beneficial owners.

The access to information on the beneficial owners is ensured in a number of countries, including Australia, Austria, Colombia, China, Egypt, Germany, Greece, Hong Kong, Indonesia, Ireland, Israel, Italy, Luxembourg, Mexico, Norway, Portugal, Romania, Singapore, Turkey[3].

The recommended amendment is also necessary for preventing abuses in the field of entrepreneurship. With this regard, the Financial Action Task Force (FATF)[4], and afterwards, the Global Forum included in their standards the requirements for shareholdings, as well as, within the scope of their competence, the conduct of assessments of accessibility of information on the shareholders.

[1] https://www.oecd.org/corruption/acn/OECD-ACN-Armenia-4th-Round-Monitoring-Report-July-2018-ENG.pdf

[2] http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32015L0849

[3] https://www.dlapiperintelligence.com/goingglobal/corporate/index.html?t=26-public-disclosure-of-identity

[4] http://www.fatf-gafi.org/media/fatf/documents/reports/mer-fsrb/MONEYVAL(2015)34_5thR_MER_Armenia.pdf