A European trading company has just screened its acquisition target. No listed entities appear by name. But two of the target's shareholders are themselves majority-owned by a person who appears on the EU Consolidated List. Is the target caught? Must the deal stop? The answer depends entirely on an ownership and control assessment (a structured legal analysis of whether a non-listed entity falls within the reach of the EU sanctions regime by virtue of its relationship to a listed person) – and getting that analysis wrong carries consequences that outlast the transaction.
Under the EU sanctions regime, a non-listed entity is subject to the asset-freeze and dealing prohibitions when it is owned or controlled by a designated person. Ownership is assessed by reference to a 50 percent or more threshold; control is a broader concept that looks at the ability to direct the entity's conduct by other means. Both tests are set out in EU Council guidance and have been interpreted by the EU General Court in a body of case-law that continues to develop as of mid-2026.
This page explains the governing legal authority, how the two-limb test works in practice, where it differs materially from the OFAC and OFSI approaches, the main risk flags, and how Calder & Vance supports clients working through these assessments.
What is the legal basis for the EU ownership and control test?
The EU ownership and control test is embedded in the individual Council regulations that give legal effect to each sanctions programme, and in the authoritative guidance issued by the European Commission and the Council. The underlying authority to designate individuals and entities derives from the Common Foreign and Security Policy decisions of the Council, implemented through directly applicable Council regulations. Those regulations impose asset-freeze obligations on any person or entity that falls within the designated category – which expressly includes entities owned or controlled by a listed person, even where the entity itself is not named on the list.
The EU General Court has consistently confirmed this approach. Where ownership through intermediate layers reaches the threshold, or where a listed person is in a position to determine the conduct of an entity without holding a majority stake, the prohibitions bite on the entity as fully as they would on the listed person themselves. Practitioners advising on EU sanctions matters note that the Court's case-law has progressively clarified the outer limits of the control limb, which is the more contested area in complex corporate structures.
The applicable regulations also impose a record-keeping obligation on persons who hold or deal with assets connected to a listed person. In our experience, clients often focus exclusively on designation-list screening and overlook the need to document the ownership and control analysis itself – leaving a gap that regulators can probe in the event of an enquiry.
How does the two-limb test apply in practice?
The ownership limb is the more mechanical of the two. An entity is treated as owned by a listed person where that person holds, directly or indirectly, 50 percent or more of the proprietary rights or an equivalent interest in the entity. Indirect holdings are aggregated: two listed persons each holding 30 percent of the same entity together reach the threshold, even if neither does alone. Layered structures require analysis at each intermediate tier; a listed person's 100 percent holding in a mid-tier entity means that mid-tier entity's own subsidiaries are also caught.
The control limb is where the analysis becomes more fact-sensitive. Control means the ability to direct, or materially influence, the entity's conduct. This can arise through contractual rights, board composition, veto powers, special voting shares, or the existence of a management or agency relationship. A listed person holding 30 percent of an entity but possessing the contractual right to appoint a majority of the board is likely to be in control for these purposes, even though the ownership threshold is not met. The EU guidance confirms that control is assessed by looking at the totality of the relationship, not any single indicator.
Do you have entities in your group – or in your supply chain – where a listed person sits below the 50 percent line but exercises influence in ways that the ownership screen would not detect? That question is precisely what a structured ownership and control assessment is designed to answer.
Where does the EU test differ from OFAC and OFSI?
The EU test and the OFAC test share a common numerical anchor – both fix the ownership threshold at 50 percent or more – but their control limbs are structured differently, and the practical reach of the two regimes can diverge significantly on the same set of facts. OFAC's ownership test is largely mechanical and was historically narrower on the control side; its guidance and related interpretive releases have moved in the direction of a broader control analysis, but the EU framework operates through an explicit two-limb structure confirmed in General Court jurisprudence, giving it a more developed evidentiary basis for the control determination.
The OFSI approach under the UK regime likewise uses an ownership and control test, but OFSI has issued its own guidance on how control is to be interpreted. The definitions are similar but not identical to the EU position, and in practice OFSI and EU licensing and compliance decisions can reach different conclusions on the same corporate structure. For a client with exposure to both regimes – a UK subsidiary of an EU parent, for example, or a dual-listed group – both analyses must be run independently. Convergence is not guaranteed, and the stricter prohibition governs in any jurisdiction where it applies.
This cross-regime dimension is not theoretical. We regularly advise clients whose corporate structures straddle the EU and UK regimes, and the two analyses frequently produce results that need to be reconciled before any transaction or restructuring proceeds. For a detailed comparison with the OFAC position, see our service page on ownership and control assessments under OFAC. For the UK parallel, see our guidance on ownership and control assessments under OFSI.
What are the main risk flags in EU ownership and control assessments?
Several structural features consistently produce elevated risk in these assessments, and each requires a defined analytical response rather than a simple pass-or-fail screen.
Layered and opaque holding structures. Where the listed person's interest is held through multiple intermediate layers – offshore vehicles, trusts, or nominee arrangements – the aggregation exercise becomes technically demanding. Each intermediate entity must be assessed independently. A holding company that is itself caught by the ownership test passes that taint to all entities it in turn owns at the 50 percent level. The analysis cannot stop at the first tier.
Contractual and governance rights. Minority stakes combined with governance rights are a recurring pattern in private equity, joint ventures, and infrastructure projects. A listed co-investor holding 20 percent of a project entity but possessing a contractual veto over material decisions may satisfy the control test even though the ownership screen returns a clean result. Standard screening tools do not detect governance rights; only a document review does.
Stale or incomplete registry data. EU Member States maintain corporate registries whose data is not always current. An ownership chain that appeared clear six months ago may have changed. The assessment must be dated and the information sources verified. In our experience, practitioners who rely on registry snapshots without checking the effective date carry a residual risk that surfaces in enforcement enquiries.
Listed persons below the threshold who are also beneficial owners. In some structures a listed person holds a nominal minority stake but is the economic beneficiary of a larger interest through arrangements that are not reflected in the legal title. These arrangements require a beneficial-ownership analysis that goes beyond the legal register.
Newly designated persons. Designations under EU Council regulations take effect on the date of publication in the Official Journal. A person designated after a counterparty relationship was established requires a reassessment of the existing relationship, not merely a one-time entry screen. The obligation to freeze assets is continuous and applies to assets that are already held.
A common misconception: why passing the name-screen is not sufficient
One of the most persistent myths in EU sanctions compliance is that a clean result from a commercial screening tool is a clean compliance result. It is not. Screening tools check names and identifiers against published designation lists. They do not assess ownership structures, aggregate indirect holdings, or evaluate contractual control rights. A non-listed entity that is owned or controlled by a designated person is caught by the EU prohibitions, whether or not the screening tool returns a match.
This distinction matters in enforcement. EU competent authorities – the relevant national authority in each Member State, under the oversight of the European Commission – take the position that the obligation to identify owned and controlled entities rests with the person who holds or deals with the assets. Demonstrating that a screening tool returned no hits is not a defence where an ownership and control analysis would have revealed exposure. The obligation is substantive, not procedural.
In a recent matter, a financial institution in the EU had run automated screening on a corporate borrower for several years without issue. Following a designation of one of the borrower's ultimate shareholders, we were instructed to conduct an ownership and control assessment. The analysis identified that the designated shareholder's indirect stake, when aggregated across two intermediate holding companies, crossed the 50 percent threshold. Existing facilities had to be reviewed immediately. Early engagement enabled the institution to manage its position in an orderly manner.
If a transaction has already been flagged, or if a screening result has triggered internal concern, an early review can preserve options that narrow with time.
For a confidential assessment of your exposure under the EU regime, contact Calder & Vance at info@caldervance.com.
How Calder & Vance conducts EU ownership and control assessments
Our EU sanctions practice is led by Claire Dubois, whose practice focuses on Council-regulation analysis, ownership-and-control questions, and annulment actions before the EU General Court. Assessments are structured around the two-limb test confirmed in the EU General Court's case-law, with specific attention to the aggregation exercise and the documentary basis for the control determination.
We approach each assessment in four stages. First, we establish the corporate structure from primary sources – corporate registries, constitutional documents, shareholder agreements, and any governance instruments that bear on the control analysis. Second, we run the aggregation exercise under the ownership limb, mapping each tier of the chain against the 50 percent threshold and noting where indirect holdings must be combined. Third, we apply the control analysis, reviewing governance rights, contractual veto provisions, and any other mechanism through which a listed person could direct or materially influence the entity. Fourth, we produce a written assessment that records the methodology, the sources consulted, the conclusions reached, and any residual uncertainty that may require further enquiry or ongoing monitoring.
Where the assessment identifies potential exposure, we advise on the available routes – which may include a licence application to the relevant EU competent authority, a restructuring of the arrangement to remove the exposure, or, where a designation is contested, the legal basis for an annulment action before the EU General Court. We classify the item, confirm licence requirements and exceptions, and design the controls that the situation requires.
For multi-regime exposures, we run the EU and OFAC analyses concurrently, and we co-ordinate with the UK analysis where OFSI is also in scope. Where local counsel in an EU Member State is required – for example to obtain a local competent authority licence or to engage with a national enforcement body – we work alongside them within the overall advisory structure.
When should you instruct counsel for these assessments?
The timing of legal advice on an ownership and control assessment materially affects the options available. There are four situations where early instruction is particularly important.
Pre-transaction. Where a counterparty, investment target, or joint-venture partner has any connection to a person on the EU Consolidated List – however distant – the assessment should be completed before signing, not after. A finding of ownership or control post-signing may force an unwinding at significant cost, and the parties' legal position in that scenario depends on whether proper diligence was carried out beforehand.
Following a new designation. When a person who is connected to an existing relationship is designated under a Council regulation, the obligation to freeze arises immediately on the date of publication. There is no grace period for commercial arrangements already in place. The assessment must be run urgently, and where exposure is identified, the appropriate authority must be notified without delay.
Where a screening tool has generated a potential match. A hit from a screening tool is a trigger for an investigation, not a conclusion. Whether the matched person is in fact a designated person, whether their connection to the entity in question crosses the ownership or control threshold, and what the legal consequence is – all of these require legal analysis that goes beyond the screening output.
Where a corporate restructuring is planned. Any reorganisation that changes ownership proportions or governance arrangements affecting an entity that has any connection to a listed person requires an updated assessment. Restructurings that inadvertently introduce or cure a control relationship have material sanctions consequences that must be assessed in advance.
The position above covers the standard case. Your facts – the corporate structure, the nature of the counterparty relationship, the regimes in play, and the timing – change the analysis. To discuss your matter, contact Calder & Vance at info@caldervance.com.
Related practices
Related practices
- Compliance audit and testing – Australia – sanctions compliance programme review and testing under the Australian regime
- Ownership and control assessments – OFAC – US sanctions ownership aggregation and control analysis under IEEPA and OFAC guidance
- Ownership and control assessments – OFSI – UK financial sanctions ownership and control test under SAMLA and OFSI guidance