ESR & UBO: Practical Alignment for 2025

Introduction

As regulatory frameworks evolve, the alignment between Economic Substance Regulations (ESR) and Beneficial Ownership (UBO) requirements has become a critical compliance imperative. This report examines the practical considerations for ensuring your corporate structures meet both sets of obligations in 2025.

The Convergence of Substance and Ownership

Historically, ESR and UBO regimes operated in parallel. Today, regulators increasingly expect substance to align with ownership structures. Entities must demonstrate that beneficial owners have genuine economic substance in the jurisdiction where the entity operates.

Key Alignment Considerations

Ownership Structure Documentation

Ensure your UBO register accurately reflects the individuals who exercise ultimate control, and that these align with the persons directing and managing the entity for ESR purposes.

Substance Requirements

Beneficial owners must be able to demonstrate adequate substance - employees, expenditure, and physical presence - in the jurisdiction where the entity claims to operate. This requires careful planning and documentation.

Cross-Border Structures

For multi-jurisdictional structures, ensure that ownership disclosures and substance requirements are consistently applied across all relevant jurisdictions, avoiding conflicts or gaps in compliance.

Practical Steps for 2025

1. Review and reconcile UBO registers with ESR filing positions
2. Document the alignment between beneficial ownership and substance
3. Implement ongoing monitoring to ensure continued alignment
4. Prepare for regulatory scrutiny of the relationship between ownership and substance

Conclusion

The alignment of ESR and UBO requirements is no longer optional. Entities that proactively address this convergence will be better positioned to navigate regulatory scrutiny and maintain compliant structures in 2025 and beyond.