On August 20, 2020, the National Assembly of the Republic of Nicaragua approved Law number 1035, the “Law to reform Law number 698, General Law of Public Registries and the Commercial Code of the Republic of Nicaragua.” This law, published in La Gaceta, Official Gazette number 158 on August 25, 2020 (the “Law”), amends articles 3, 36, 155, 156, 158, and 171 of Law number 698 and article 121 of the Commercial Code.
The primary purpose of this reform is the creation of the “Registry of Ultimate Beneficiaries of Commercial Companies,” which will have the following functions:
- To register the ultimate beneficiary information declared by the commercial company.
- To ensure the integrity, confidentiality, traceability, and security of the data held in accordance with generally accepted international standards for data management and protection.
- To guarantee access to the ultimate beneficiary information for interested commercial companies, competent authorities, and relevant institutions.
With this reform, all companies must keep their basic information up to date, which means reporting changes in their shareholding, participation, ownership, control, and legal representatives; as well as any change that modifies the information about the ultimate beneficiary of the commercial companies.
When national and/or foreign commercial companies appear as partners in the act of forming and/or modifying a legal entity, the ultimate beneficiary must be successively identified, in accordance with the chain of ownership or complexity until the individuals who exercise control are determined. When one of the partners is a foreign legal entity, in addition to the aforementioned information, a certified copy of the constitutive deed, the company’s articles of incorporation, and its bylaws must be attached, along with an updated registration certificate showing the registration data of the company and an updated certification of the company’s shareholding. These documents must contain the respective authentication or apostille.
The registration of documents authorized in Nicaragua must be done within a period not exceeding 30 calendar days, and documents authorized outside the country must be registered within a period not exceeding 60 calendar days. In both cases, the period starts from the date of their granting.
The reform to the Commercial Code only affects Article 121, which establishes: “Every company contract must be in a public deed. Any contract stipulated between partners in another form will not produce any legal effect. Commercial companies must identify and update the ultimate beneficiary information and declare it to the corresponding Registry.” This makes the identification and updating of the ultimate beneficiary in their contracts an obligation for commercial companies.
The registration of the ultimate beneficiary is mandatory for all acts and contracts indicated in the law. In case of non-compliance, in addition to the sanctions established in the regulations on the matter, companies will be subject to administrative sanctions and will not be able to register any document in the Registry or take advantage of its legal effects. Furthermore, judges will not process lawsuits filed by subjects who, being required to be registered in the Registry, do not attach the corresponding certification to the lawsuit.
The Special Registries Commission will issue specific regulations for the Registry of Ultimate Beneficiaries of Commercial Companies and the procedure to be followed to complete it.