Modern life introduces many foreign words into everyday life. One of these terms is often used in insurance, law and banking, although its general meaning is intuitively clear. It's about the word "beneficiary". This concept is often found on the pages of special editions. Let's try to understand its meaning.
Basic definition
Wikipedia and various encyclopedic dictionaries give us the following definition of this concept: a beneficiary is a person who is the final recipient of a certain monetary payment. The basis for receiving funds is a debt document or contract.
Origin of the concept
Presumably the word originates from the French language. The original word means benefit, monetary gain, profit. In turn, the French word has Latin roots - the Latin bene is translated as "benefit". Thus, the beneficiary can be called a beneficiary.
Beneficiaries in real estate
This term has other meanings as well. For example, in civil law, a beneficiary is an entity that benefits from the rental of real estate, in other words, a rentier. This can also be called people who have transferred the rights to manage their property to third parties. In this case, the ultimate beneficiary is a person who receives income, but does not participate in management. In the case of a business enterprise, this can be called the owner, who transferred the rights to the director or manager, and he simply receives income from the activities of the company.
Beneficiaries in insurance
In the insurance business, there is the concept of "ultimate beneficiary". This is the person in whose favor the insurance payment will be made. In case of various surprises and illnesses, the beneficiary is usually the person whose health and property is insured. In accidents or sudden death, another person is called the beneficiary - usually close relatives or friends of the deceased.
Beneficiaries in banking
In some cases, the beneficiary is a depositor of a particular bank. So in the contracts are called the owners of documentary letters of credit, persons indicated as recipients of bank certificates, or those who receive collection payments.
Business area
In contracts governing the economic activities of an enterprise, the beneficiaries of a legal entity are those who directly own the enterprise. Usually this is a list of individuals who enjoy the rights of owners or owners of the company. The receipt and distribution of net income can be carried out both by the beneficiaries themselves and by intermediaries acting in their interests. At the same time, the legal ownership of the company's assets may belong to a completely different person or even a competing company. This is how paradoxical situations arise in the market when companies owned by one person are fiercely competitive for sales markets.
Sometimes it happens that the beneficiaries are the founder or several founders who actually own the company, but do not manage it. Often top managers for this job are hired on the side and used in temporary, albeit very well-paid positions. In this case, the manager of the company assumes all the risks of the development of the enterprise, its success and expansion. In case of success, interim managers receive a large profit, in case of defeat - an indelible stain on their professional reputation.
The ultimate beneficiary is a person whose personal data is available only to the financial institution that the company uses. Therefore, the true ownership of many economic enterprises can be so difficult to prove. In any case, the beneficiary is an individual. It cannot be any organization or voluntary society.
The owners of securities are often the beneficiaries. The right to own other people's assets belongs directly to him. As the owner of securities, the beneficiary has the right to participate and vote in the meetings of the joint-stock company, to elect the management of the company. As a holder of securities, he takes part in various activities of his own company.
Publicity of the beneficiary
In many countries, the names of the real owners of enterprises, companies and large trusts can be found in public registers posted on government websites. This is how the public controls the owners of continental corporations themselves, preventing them from joining oligarchic unions. On the other hand, there are many legal tricks that allow you to use income in the conditions of anonymity. In the so-called offshore countries, special local laws have even been developed that allow owners of large capitals to use their money, while remaining unknown.
In our market time, a lot of specific words have appeared that people did not know about before. Many of them are, as they say, "on hearing", for example, the beneficiary. What is it - in simple words, we can say that this term is associated with monetary transactions, and this is generally true, but everywhere there are nuances.
Who is a beneficiary?
The interpretation of this term can be found in various dictionaries of economic, legal, financial orientation, business directories:
- Translated from different European languages, it has the semantic meaning of profit, beneficence, benefit, the owner of a letter of credit receiving money on it, etc .;
- Is a citizen who receives income from his property in his trust management, as well as, for example, inheritance by will;
- May be a person in favor of whom payments are made or gaining profit as a result of renting out his property, hiring, transferring the right to use it to third parties;
- Human, receiving money under an insurance policy, a credit card to which they were transferred to him for the performance of any work;
- Bank client who instructed this credit institution managing your funds by contract or agreement;
Parallel to the specified term, the name "beneficiary" can be used.
History of the financial term
It takes its origins in ancient times:
- During the heyday of ancient Rome, this concept was widely used to refer to those people who were in military service and were exempted from hard work. Usually they served in the protection of an official - a tribune. In the era of the empire, they could claim the title of centurion;
- In the Middle Ages beneficiary a certain land ownership was called, which, as a rule, was allocated on the terms of military service to those to whom it was given. However, there were options with administrative or court service;
- This word has entered the modern language with meanings that are very different from the original ones. At the same time, the range of areas in which it is successfully and widely used has significantly expanded. This includes, in particular, the activities of financial, legal, economic organizations. The term has become quite capacious and multifaceted.
Beneficiary and Beneficiary: What's the difference?
Generally, these terms are synonymous, but have some differences in their practical application:
- The recipient of the benefit can be not only a citizen, but also an organization acting as a legal entity, and operates mainly in the insurance business;
- He is mentioned separately in the text of the relevant contract concluded between the insured and the insurer as a third party who, in a certain case, has the legal right to receive payment, either in kind (for example, in the form of a medical service) or in cash (with receiving an inheritance). In the latter case, he is mentioned in the policy as a beneficiary, or in the will or order of the insured person;
- Being a beneficiary, you can use not only a cash, but also a letter of credit in transactions between organizations and enterprises, companies;
- In a property trust management agreement, it can be either the founder of the management himself or a special person in whose interests this process is carried out.
The above terminology also has such a semantic concept as "recipient".
Beneficial owner - who is it?
The wording was introduced in 2013 and revised in 2016 based on the 2001 Russian legislation on combating criminal proceeds (Law No. 115-FZ):
- The term refers to the presence of a specific a person who benefits from the activities of a company or able to control it. Methods of influence can be direct or indirect, through the ownership of a certain number of shares. If the client is a citizen, i.e. individual, then he is considered the beneficial owner. In some cases, however, there are reasons to consider him a completely different person;
- The concept of a beneficiary is defined by law as the receipt of profit by an individual from a client as a result of an agreement concluded with him for the performance of a certain type of financial or commodity transactions;
- According to Article 6.1 of the above law, the company is obliged to have, update and provide information to the state authorities about its beneficial owners. It also has the right to request information about these persons from its founders and shareholders.
The law of the Russian Federation provides an opportunity to disclose information about the true owners of a particular legal entity, which is reflected in the company's financial statements.
What are the types of contracts with the beneficiary?
There are different types of profit acquisition agreements:
- A bank guarantee that ensures the financial security of a transaction between the customer (beneficiary) and the contractor (principal). The bottom line is the mediation of the guarantor bank, which, for a certain amount of commission from the transaction, ensures the fulfillment of obligations by the contractor for the customer. If the latter fails to comply with the terms of the transaction, the bank pays the agreed amount and then claims its compensation from the principal;
- Agreements with trust organizations for trust management of property, companies, money, securities, etc. on the terms agreed with the founder (beneficiary, owner), are concluded for a strictly defined period;
- Insurance policies of various subjects, where both the policyholder and a specially registered person can act as a beneficiary, who, upon the occurrence of the relevant event, will receive a refundable amount, for example, under a will.
If interest is transferred to you from a rich inheritance, congratulations, you are a beneficiary. What is it - in simple words it is defined as income earner, beneficiary, which you probably already understood from the text of the article. The forms of acquisition are different, the essence is the same - profit.
Video: simple people to difficult questions
In this video, Yuri Antonov will interview people on the street for knowledge of the financial term "beneficiary":
Beneficiary- this is the recipient of cash payments (income) according to the drawn up agreement or debt document. Such a recipient can be not only an individual, but also a legal entity that owns all or the main part of the company's shares and receives all income from the company's activities.
Sometimes the concepts of beneficiary can be conveyed to beneficiary. However, its value will not change at all.
Description of the beneficiary in simple words
The beneficiary is the person who owns the documents for the property (company, business, real estate) and receives the main profit from this.
Beneficiary - information from Wikipedia
Other meanings of the term "beneficiary"
However, the concept of a beneficiary can be considered from other non-identical points of view.
- So can be called persons who receive income from their property, which is in the use of third parties or in trust. We are talking about the lease of movable and immovable property or the fact of the transfer of securities for use by brokers.
- There is another interpretation of the concept of a beneficiary. In this case, they will be presented with the person acting as insurance payments, which was appointed by the insured. In this case, the beneficiary is indicated in the insurance policy. In the event that the beneficiary, due to certain circumstances, cannot receive the agreed debt, all rights to the ownership of the funds paid out will be transferred to the person who is the beneficiary's heir.
- Also, this term refers to the direct recipients of a bank certificate, funds in collection or recipients of financial benefits from a trust. The beneficiary can also be called persons who have been indicated by the issuing bank as potential owners of a documentary letter of credit.
- If we talk about the business sector, then here the actual owner of the company, who makes a profit, can act as a beneficiary. This is an individual who is able to enjoy all the rights of the owner and position himself as the owner of the company. This process can be carried out directly or through participation in other organizations. At the same time, from a legal point of view, the ownership is wholly owned by another person. Most often, the same person also acts as a manager of the company's bank account. The beneficiary can only be disclosed to the financial institution and the agent of the company that has been registered.
The beneficiary, who is positioned as the owner of the securities, has the full right to transfer ownership rights. In addition, he has the indirect right to vote at the meeting of the joint-stock company, as well as the right to be directly involved in the process of choosing a new management and resolve issues related to the procedure for changing the authorized capital or changing the profile of the joint-stock company.
To hide the identity of the ultimate beneficiary, a nominee service is quite often used, which is allowed in many offshore companies. The choice of the level of protection of a suitable company and related requirements for documents can be carried out depending on the personal wishes of the client.
Providing information about the beneficiary is a mandatory procedure. An exception may be companies that are quoted publicly. The same list includes charitable and public organizations, institutions of the state type, which cannot have owners or if they are known in advance.
Only an individual can act as a beneficiary. A trust agreement can be drawn up for a legal entity, however, it is first necessary to provide all information about the individual who is the actual owner of this organization.
Evgeny Malyar
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business vocabulary
Terms, definitions, documents
Beneficiary (from French benefice "profit, benefit") - an individual or legal entity to whom a cash payment is intended; money recipient.
Article navigation
- What is a "beneficiary" from a linguistic and legal point of view
- Who are the legal beneficiaries
- What is the difference between a beneficiary and a beneficiary
- How to find out the beneficiaries
- Ultimate beneficiary
- Why is it so important
- Who has the right to demand information about beneficiaries
- Who are the beneficiaries of a legal entity
- Principal and Beneficiary
- Rights and obligations of the guarantor, principal and beneficiary
- What is a "beneficiary's bank"
- Accounting information about the beneficial owner
- Information about the chain of ownership, including beneficiaries
- Beneficial Owner Questionnaire
- The beneficial owner is the founder or not
Each accountant who made payments abroad filled in the details of the beneficiary's bank. This word is sometimes used in everyday life when they want to name someone on whom an event will reflect most favorably. From this article, you can learn the different meanings of the term "beneficiary" in relation to business.
What is a "beneficiary" from a linguistic and legal point of view
Or who is this? Clarification is not superfluous, since both legal entities and individuals are designated by this foreign borrowing. The morphology of the term is French, related in origin to the word “benefit performance”, which is pleasant for artists. In translation, the root benefice means profit or benefit.
In a business sense, it is impossible to unambiguously formulate in simple words what the word “beneficiary” means - the meaning of the concept depends on the context. Here are the possible definitions:
- Beneficiary (generally).
- In the banking sense, the beneficiary is the natural or legal person to whom the payment or transfer is addressed. Indicated in the payment order.
- The owner of an organization (asset, firm, real estate, business) that makes a profit.
- Copyright owner.
- Beneficiary in the event of an insured event. It is not necessarily the owner of the policy: in this case, the beneficiaries may be the heirs.
- The recipient of a debt, for example, the bearer of a bill of exchange (draft) for the debts of the borrowing company.
- The person receiving the bank certificate.
- The potential owner of the letter of credit indicated by the bank that issued it (put it into circulation).
- The real, and not the nominal owner of the enterprise (sometimes not explicit, but hidden), who acts through intermediaries, but exercises control and makes a profit (beneficial owner).
- The person is the manager of the bank account of the company (for example, the bankruptcy trustee).
- In international trade, beneficiary countries are exporting states that receive foreign exchange earnings.
However, these definitions still do not fully explain what a beneficiary is. Additions and clarifications are required.
Who are the legal beneficiaries
It is best to consider any incomprehensible situation in a legal aspect - this way it looks simpler. The legal system of the state counteracts illegal money circulation. The purpose of the Federal Law of the Russian Federation 115 FZ is to prevent money laundering and ensure complete clarity as to who owns the assets.
It is no secret that sometimes one person is considered the owner of an enterprise (or a bank account), but in reality this property belongs to another person, who for some reason hides his wealth.
115 FZ indicates how to determine the real owner. The legislative act clearly establishes the reasons for classifying an individual as a beneficial owner:
- Direct or indirect participation in the capital of the enterprise in the share of 25% or more. In this he differs from a shareholder who has bought a small amount of securities based on dividends;
- The ability to control the activities of the business structure in order to maximize profits;
- The presence of relationships and actions that directly indicate the involvement of a person in business activity and his interest in the financial results of the enterprise. Such circumstances may include insurance, bills, the purchase and sale of shares, participation in meetings of the board of founders.
The same criteria distinguishing the beneficiary are indicated in civil law.
What is the difference between a beneficiary and a beneficiary
The term “beneficiary” refers to a person who receives income from an asset. The beneficiary, in fact, has the same goal. Owning an enterprise or its share, he makes efforts to make a profit. What is the difference? It exists, and it is significant. Every person who benefits from commercial activities is a beneficiary. The difference from the beneficiary is that the latter has a real opportunity to manage the process of making a profit, intervene in it, control and exercise control actions. This right gives him a share in the capital (at least a quarter, as already mentioned above). The ordinary beneficiary is deprived of this power.
How to find out the beneficiaries
In real life, information about beneficiaries may, for various reasons, be a commercial secret, but the state, receiving this information from the owners, keeps it secret.
It happens that there are simply no beneficiaries, and by definition there cannot be, as well as beneficiaries, for example, in a charitable or non-profit organization.
Foreign firms and their branches are required to maintain a register of beneficiaries. When fulfilling legal requirements, government agencies should not have problems with how to determine the owner of the company.
The Civil Code contains articles on liability for misrepresentation of information provided, providing for severe penalties, and criminal penalties are applied to funds of criminal origin. The inspection bodies have enough means and opportunities to find out whether the CEO is the beneficial owner or someone else is running the enterprise.
Below in the article is a sample of filling out a table in which entrepreneurs undertake to annually indicate the beneficiaries and, in case of changes, reflect them.
Ultimate beneficiary
The adjective seems redundant (after all, it is clear that this is the true owner), but only at first glance.
Firstly, the ultimate beneficiary is always only an individual, that is, a certain specific person who receives income from the business.
Secondly, it may not exist at all, since an ordinary person, unlike a legal entity acting as a beneficiary, does not necessarily own a quarter of the capital of the entire business.
Example: Company A owns 30% of Company B. At the same time, each of the founders in LLC "A" has ten percent of the shares, respectively - 10. There is no ultimate beneficiary in this case, since none of the owners of "A" meets the definition of who such a beneficiary is (necessarily 25 percent own).
Why is it so important
The need for the law FZ 115 objectively exists. The state is obliged to fight shadow business schemes, expose corruption and cut off financial flows that fuel terrorism.
Information about the true owners of enterprises, bank accounts and other assets is also mandatory provided by financial institutions: leasing and insurance companies, pawnshops, stock market operators. It happens that the head of the company is the notorious "sitz chairman", whose functions include only the signing of documents.
Information about the owners of the counterparty, including the ultimate beneficiaries, may be requested not only by government agencies, but also by other organizations, if a reasonable request is submitted. In particular, the disclosure of beneficiaries is especially important in public procurement.
Who has the right to demand information about beneficiaries
The final and initial chain of beneficiaries, in accordance with Article 105, paragraph 2 of the Tax Code of the Russian Federation and Decree of the Government of the Russian Federation No. 913 of July 31, 2017, is disclosed at the request of the Federal Tax Service or Rosfinmonitoring, including its interregional departments.
The certificate of ultimate beneficiaries is a list containing the following information (FZ 115, art. 1, p. 1):
- Name (full);
- Citizenship;
- Date of Birth;
- Series and number of the passport (citizen of the Russian Federation) or residence permit (if a foreign person);
- Individual tax number (code).
In practice, all affiliates are also checked.
Download Sample
The given sample of filling in the table may contain information about one beneficiary (if he is the only one) or several.
Disclosure of beneficiaries is not mandatory for public authorities, as well as institutions with a share of state capital (including regional and municipal structures) over 50%.
Who are the beneficiaries of a legal entity
About who is the beneficial owner of a legal entity, in fact, so far it has been discussed in the article. This is a person who has the opportunity, by virtue of a significant share of his participation in the capital of a registered company, to take part in the management of it. Could there be any other beneficiary? The answer to this question is in the affirmative.
The beneficiary of a natural person is the recipient of the benefit from another natural person as a result of inheritance, gift agreement or other legal actions establishing his ownership of property or money.
The difference in this case is the same as between a businessman and just a rich person. The first multiplies his fortune and has the means of production for this, while the second can only spend his money.
As already mentioned, the beneficial owner in an LLC has at least a quarter of the total share capital.
Principal and Beneficiary
A bank guarantee is one of the most important tools for ensuring the security of a major transaction. In relation to such a situation, the concept of a beneficiary acquires a special meaning, but besides him, two more persons are involved in the process: the principal and the guarantor.
The principal is the party that applies for a guarantee to the bank and undertakes to fulfill the terms of the contract.
After this definition, the scheme of the guarantee process becomes clear. The contractor is usually interested in the transaction, and it is he who makes efforts to convince the customer that he does not risk anything by dealing with him. He also pays for the services of the guarantor.
The beneficiary in a bank guarantee is the other side of the contract. The guarantor is a bank (or other financial institution), and it provides insurance for the fulfillment of mutual obligations.
Rights and obligations of the guarantor, principal and beneficiary
The basis for the emergence of the obligation of the guarantor to the beneficiary is the principal's failure to fulfill the terms of the concluded contract. In this case, the costs and losses are repaid by the bank in full.
Of course, not every person can receive a guarantee - it must meet a number of requirements established by the institution that is a potential guarantor. In particular, solvency and the size of the founding capital matter.
The obligation of the guarantor under the guarantee to the beneficiary is terminated if it turns out that the principal has provided false information about his financial position.
Not only the beneficiary has rights, but also the other parties to the agreement (principal and guarantor). The customer, if he makes unreasonable demands (the fact must be documented) or provided false information about the failure to fulfill obligations under the contract by the other party, is deprived of the right to the guarantor's obligation provided for by the bank guarantee.
In addition, the legislation (Civil Code of the Russian Federation, Art. 378 and Chapter 26) provides for other cases of termination of the guarantee:
- Payment by the guarantor of the amount of the guarantee;
- Expiration of the warranty period;
- Voluntary waiver by the beneficiary of his right to a guarantee.
The latter situation is caused, as a rule, by the circumstances forcing the beneficiary to withdraw his claims and the realization of the weakness of his legal positions in the event of litigation. However, this possibility is provided for by Article 378 of the Civil Code of the Russian Federation. To do this, you need to write a letter of appropriate content addressed to the guarantor.
Download Sample
What is a "beneficiary's bank"
The beneficiary's bank is the guarantor of the transaction. This financial institution has the authority to make a request, the purpose of which is to determine the true beneficial owner of the bank's client. Who is it: an honest businessman who, for some business reason, hides the fact that he owns the enterprise, or a representative of organized crime?
The personal data of the beneficiaries for the bank are provided in the form of a certificate (Article 7 of the Federal Law No. 115 allows a simplified format) corresponding to the above sample.
Accounting information about the beneficial owner
Article 105 of the Tax Code of the Russian Federation establishes mandatory disclosure of information about the beneficiary in the financial statements. It also contains a complete list of related parties and "intermediate" companies (including those affiliated and controlled by foreign firms).
In response to a formal request for information about the beneficiaries of a legal entity, the organization must send a letter. An exemplary sample of filling is given earlier in the text of the article and contains information by which it is possible to identify the identity of the owner of the enterprise.
The consent of the beneficiary to the processing of personal data is not provided for by law.
As already mentioned, this certificate may be needed not only by state regulatory authorities, but also by banks when issuing guarantees.
Information about the chain of ownership, including beneficiaries
At the request of the counterparty, since 2012, on the basis of Instruction No. VP-P13-9308 of the Government of the Russian Federation, organizations undertake to provide information on the chain of beneficiaries (including the final one) and owners. The attached form contains mandatory fields. Additional explanations about how to fill in the information are not required. It should only be remembered that individual entrepreneurs and individuals duplicate information in the left and right parts of the table. A sample of filling in personal data has already been given.
The table is a list of legal entities belonging to each counterparty.
Beneficial Owner Questionnaire
Information about the beneficiary is provided voluntarily, simultaneously with the consent to the processing of information, and is drawn up in the form of a questionnaire. This document is needed to open a bank account, as well as in case of changes in the composition of the founders or data from the Unified State Register of Legal Entities. Form for a legal entity:
Download form
Form for an individual:
Download form
No special explanations are required - the property is paid in full in accordance with the constituent documents.
Since the final beneficiaries can only be individuals, the requirements for the accuracy of the information they provide when filling out the questionnaire are the most stringent.
If a company fails to provide government authorities with information about beneficial owners, it may be subject to penalties in accordance with Article 14.25.1 of the Code of Administrative Violations:
- For officials - from 30 to 40 thousand rubles.
- For legal entities - from 100 to 500 thousand rubles.
The beneficial owner is the founder or not
So, it remains in conclusion to dwell on how to determine the beneficiary by appearance and position. It can be the founder or the CEO, and sometimes they are the same person. Or they are different people, and they are located far from each other (sometimes at different ends of the planet).
The reader, who has carefully read the above text, is also able to understand how the beneficiary differs from the founder:
Firstly, the person who created the enterprise can later sell part of his share or all of it to other people.
Secondly, there is a very clear legislative criterion for whether a particular person is a beneficial owner. This is the ownership of a quarter (or more) of the authorized capital in the company's securities.
Example:
Mr. Petrov has a 60% stake in Alfa, which in turn owns 83% of Beta LLC. The general director of Beta LLC and the founder of this company, Sidorov, has a portfolio of 23% of the shares of the enterprise he heads. Which of these two persons can be considered the beneficial owner?
At first glance, it seems that Sidorov looks more solid. Firstly, he is a leader, and secondly, he is only a little short of the 25% quota established by Federal Law 115. In addition, it is quite possible that he drives a more expensive car and wears a prestigious suit, which Petrov does not have.
What does it mean?
A beneficiary is a person who receives benefits, profits, income from a business. This is the name of the final recipients of the payment. The meaning may vary depending on the situation.
Company ownership
Most often, when opening enterprises, shareholders, directors, etc. are registered, but the names of the real owners remain unspoken. In this case, the beneficiary is the person who is actually the owner and receives benefits and profits from the activities of the enterprise. This role can be played by an individual who, through participation in other companies or directly controls the shares of the enterprise. In this case, legal ownership can be assigned to other people or companies. Information about beneficiaries is confidential, provided exclusively to the bank or registered agent.
Through the use of nominee directors and shareholders in offshore companies, it is often hidden who the ultimate beneficiary is. This scheme is most often concluded using a nominal agreement or a declaration of trust. Occasionally, an act of establishing a trust property is used.
Thus, the chain of ownership, including beneficiaries, rarely becomes public knowledge.
Bank account ownership
In this case, the beneficiary is the owner who has control over the assets or funds in that account. This person can indirectly or directly manage finances. Moreover, the concept applies exclusively to persons who have full control over these funds, even if the beneficiary does not directly perform any operations, but they pass on his instructions. When opening an account, credit institutions always ask for information about the final beneficiaries.
Trust management
In this case, the beneficiary is a person who receives income from property transferred to trust management or given for use to third parties.
Insurance
In this case, the term is used in relation to the person who will receive the sum insured. If a person is insured against death, the primary (or conditional) beneficiary may be any other person.
Inheritance
The beneficiary is the heir in accordance with the will.
Renting or leasing property
The term is applied to an individual who receives or rents.
Letter of credit
If the money is issued under a letter of credit, the beneficiary is called the person in whose name the issuing bank opens it.
Opportunities and rights of beneficiaries
If the beneficiary owns the shares of the enterprise, he has the right to transfer his ownership rights to another person. The ultimate owner takes part in resolving issues related to the authorized capital. Also the beneficiary has indirect shareholder meetings. The owner can take part in choosing the board of the company.
