Named Beneficiary

A named beneficiary is a person who is the recipient of funds and to whom a cash payment is made.

The named beneficiary receives income from his property, transferred in trust to another person when renting or hiring property or from the use of his property by third parties.

The named beneficiary is also the person in whose favor the issuing bank opens a documentary credit. 

In practice, the named beneficiary is the exporter, seller of goods or services, which is the subject of the international contract of sale.

Named Beneficiary explained

The beneficiaries may be:

• Heirs named in a will as persons receiving certain property for ownership or administration;
• Landlords who rent out their assets for a regular fee;
• Bank account holders;
• Persons who have placed their property or finances in trust for the purpose of generating income;
• Owners of documentary credits;
• Persons who are the beneficiaries of insurance contracts;
• The actual owners of the companies.

The ultimate beneficial owner of a bank account is a person who has control over the funds or assets in the bank account and directly or indirectly manages, controls and disposes of the account. In this case, the named beneficiary may not directly perform operations on the account (deposits, transfers, withdrawals, etc.), but if at his direction these actions are performed by another person, then the control and management of the account ultimately remains with him. And it is he who will be considered the ultimate beneficial owner of the account.

In the case of company ownership, the ultimate named beneficiary is the actual owner of the company who receives income in the form of cash or other type of benefit from the ownership of the company. It is an individual who directly or through participation in other companies is the owner of the company. The ultimate named beneficiary enjoys the rights of the owner of the company, although legally the ownership may belong to another person.

The named beneficiary as the owner of a company, without revealing his identity, is able to:

• participate in the formation of its share capital;
• to choose the sphere of its activity;
• transfer shares in the company to other persons;
• to participate in meetings of owners of shares;
• participate in the election of directors of the company.

Rights of Named Beneficiary

The named beneficiary has a certain amount of rights. First of all, they are entitled to dispose of their share in the company. The beneficiary may sell all of their shares or just some of them. Secondly, they can supervise the discharge of duties by the management of the company, appoint and dismiss the managing director on lawful grounds. They are also enabled to participate in shareholder and foundation meetings and take part in decision-making as well as receive income from the company's activities in accordance with the size of their stock. 

Legal regulations of Named Beneficiary

The named beneficiary shall have the right to take recourse to court to protect his interests. It so happens that the right of the named beneficiary can be violated in various ways, for example, by the management of a company carrying out illegal operations, not complying with the contract terms or reducing the named beneficiary’s control over the company. Named beneficiary’s rights can be also protected in case of the fraud activity of the company’s management.

The possibility of beneficiary owners to participate in the management of the company, control its actions, and cause special interest in the various inspection bodies.

Information about beneficiaries is important for state structures in order to counteract:

• money laundering in violation of the law;
• financing of terrorist and other criminal organizations;
• financial fraud;
• illegal transfer of money abroad;
• other criminal actions.

For business lending organizations, information about ultimate beneficiaries is important when deciding whether to grant loans.

Based on the identity of the named beneficiary, the company's reputation and the risks of its lending are assessed.

The named beneficiary who is the owner of the company has a duty to provide information about himself in response to requests from supervisory authorities, when entering into contracts and agreements with state-owned enterprises.

The collection of such information is carried out in order to obtain the greatest transparency of the actions of the company itself and to establish its true owners.