As part of Paraguay's commitment to the Financial Action Task Force of Latin America (GAFILAT), in November 2019 the Executive Branch enacted Law No. 6446 creating a “General Directorate of Legal Persons and Structures and Beneficial Owners” under the Ministry of Finance (hereinafter the Law), which will have the following functions:
- Acting as enforcement authority, replacing the Treasury Counsel's Office, of Law No. 5895/2017 “Which establishes Transparency Rules in the Regime of Companies Incorporated by Shares”.
- To establish guidelines for the administrative registration and supervision of legal persons and structures.
- To manage the Integrated System of Administrative Registration and Control of Legal Entities, Legal Structures and Beneficial Owners.
- Those assigned in corporate matters by legal provisions to the Department of Registration and Control of Companies of the Treasury Attorney's Office; and
- Any others attributed to it by law or regulation.
- The General Directorate of Legal Persons and Structures and Beneficial Owners will set up an Administrative Registry for legal persons and structures operating in the Republic of Paraguay, and an Administrative Registry for the beneficial owners of such legal persons or structures.
Due to the great importance for legal entities incorporated in Paraguay of the registries created by the Law, and the seriousness of the penalties applicable in the event of non-compliance with its provisions, this Law deserves special emphasis with respect to other laws enacted in the framework of the fight against money laundering, corruption and organized crime.
For the aforementioned reasons, we highlight the following aspects of the Law:
1. Obliges all legal entities incorporated in the country, whether they are corporations or limited liability companies, associations, foundations, etc., and legal structures such as trusts or investment funds.
2. In the Administrative Registry of Persons and Legal Structures, regulated entities must submit the following information:
- Full details of shareholders or authorities in charge of the management, control, and administration of the legal entities;
- Bylaws;
- Last shareholders' meeting for the election of officers, if applicable;
- Those that issue shares or nominative securities must communicate the identification data of their holders, the percentage or right that their participation in the capital stock implies, and
- Those in which the substantive participation of the capital belongs to companies or legal entities resident abroad, must maintain updated information on the ownership of shares or quotas of capital, and the powers granted in the country.
3. In the Registry of Beneficial Ownership, the parties bound by the Law shall:
- To report, as a sworn statement, the data of the [1]Final Beneficiaries including the entire chain of title holders;
- In the case of trusts, the individual(s) who are the beneficial owner(s) must be identified in relation to the settlor, trustee and beneficiary.
- The Law provides that when it is impossible to identify the beneficial owner, it will be presumed that the beneficial owner is the legal representative of the person or legal entity resident in Paraguay.
4. Any modification recorded in the data declared in the Administrative Registry of Legal Entities and Structures and Beneficial Ownership must be reported to the enforcement authority within a maximum period of 15 (fifteen) working days after the fact has formally occurred.
5. The deadlines for registration in the Registries established in the Law are as follows:
- At the Administrative Registry, within 45 (forty-five) business days after the incorporation of the legal entity or structure.
- In the Registry of Final Beneficiaries, within a maximum term of 9 (nine) months as from the effective date of this Law, and according to the calendar to be issued by the enforcement authority.
- The provision of the required information shall be made in all cases within the terms, forms and conditions established by the regulations and shall be considered as a sworn statement, without prejudice to the verification and other requirements by the enforcement authority.
6. Upon expiration of the deadlines for registration in the records and reports required by this Law, the persons and legal structures that have not complied with the obligation shall be subject to the following consequences:
- They may not open new accounts, issue debt or equity securities, or carry out deposit or remittance procedures, or perform other transactions, whether active, passive or neutral, with the entities that make up the Financial System.
- Blocking of the Single Taxpayer Registry (RUC) by the Undersecretariat of State for Taxation (SET); and,
- Suspension of the processing of any other submission to the enforcement authority of this Law.
- Only once the unfulfilled obligation has been regularized, the enforcement authority will issue a certificate of compliance with the obligations set forth in this Law in order to carry out the suspended procedures again.
7. The sanctions established by the Law for cases of non-compliance with its provisions range from the application of direct fines of 50 (fifty) to 500 (five hundred) minimum wages for unspecified miscellaneous activities of the capital, to fines equivalent to 30% (thirty percent) of the profits or dividends to be distributed among its shareholders or partners.
The sanctions established by the Law may also be applied to whoever refuses to provide information or provides erroneous, false or incomplete information on the administrative registration of the person and legal structure and the beneficial owner.
The consequences established for cases of non-compliance with the Law, as well as the penalties established, will be applied progressively by means of a compliance calendar to be issued by the Ministry of Finance, granting a period of time necessary to make the pertinent structural adjustments, as well as the prior and necessary training to the obligated parties.
8. Duty of Information. The enforcement authority shall inform bimonthly to the Central Bank of Paraguay (BCP), to the Secretariat for the Prevention of Money or Asset Laundering (SEPRELAD), and to the Undersecretary of State for Taxation (SET) of the Ministry of Finance the list of the legal entities that have complied with the obligations provided for.
The compliance list will be published and updated semi-annually on the web portal and will be freely accessible to citizens, in accordance with the terms of Law No. 5282/2014 “ON FREE CITIZEN ACCESS TO PUBLIC INFORMATION AND GOVERNMENT TRANSPARENCY”.
The parties bound by the Law must keep for a period of 5 (five) years the documents, files and correspondence that accredit or properly identify the Beneficial Owners and all the documentation that supports the information required by the enforcement authority.
For further information or questions regarding the implications of this Law, please contact Dr. Perla Alderete (Partner). palderete@vouga.com.py
[1] Persons or entities that directly or indirectly hold a substantive participation or ultimate control over the legal person or legal structure or benefit from it within the limits defined by law.
