Author: Mgr. Iva Čípová, Mgr. Zuzana Carvová, 28. 05. 2021
In our previous articles we have informed you in detail about the new Act on the Register of Beneficial Owners. As the Act will soon come into force we bring you a summary of the obligations that an authorized representative or a partner/shareholder shall comply with and what changes the Act introduces.
As the concept of beneficial owner was not precisely defined and the previous definition did not correspond to reality, the Act brings a more accurate definition of this concept. So far the concept of beneficial owner was defined as “an individual who has, in fact or in law, the power to directly or indirectly exercise a decisive influence in a legal entity, in a trust or in other legal arrangement without legal personality”.
The Act states that a beneficial owner is “every natural person who is an ultimate beneficiary or person with ultimate influence”. The ultimate beneficiary of a legal entity is “every individual who can, directly or indirectly through another natural person or legal arrangement, receive a significant part of the aggregate benefit generated by the operation or liquidation of a legal person or generated by the administration or termination of a legal arrangement and who does not further hand over the benefit”. A person with ultimate influence is “a person who can, without the instruction of another person exercise directly or indirectly decisive influence in a legal person or upon the administration of a legal arrangement”.
Therefore, the beneficial owner must be in any case an individual. If a company has a complex ownership structure, the beneficial owner must be traced at the end of the structure so that it is an individual. The beneficial owner will be identified on the basis of the actual situation and not only on the basis of the amount of shares in the company. The identification of the beneficial owner will also depend on the memorandum of association/articles of association, the text of contracts related to the operation of a company (e.g. shareholders’ agreements, contract of mandates, silent partnership contracts) as well as the concerted practices of the shareholders.
The authorized representative of a legal entity is obliged to ensure that the beneficial owner is entered into the Register of Beneficial Owners without undue delay after the occurrence of a decisive fact, i.e. within a few days after the change in the company. It will be possible to make the registration of beneficial owners by a court, a notary and in some cases also by an automatic transcript from the public register.
In case of the court´s registration of a beneficial owner it will be necessary to fill in a form and pay a court fee of CZK 4000. If the registration is entered by a notary, it is sufficient to submit an application for registration of the beneficial owner and the fee for this registration will be CZK 2400. In for simpler inscription or CZK 3400 for more complex inscription (i. e. in case that the property relation structure of a legal entity comprises of more than 4 subjects).
The automatic transcript will be carried out in cases where the beneficial owner is apparent from the public registers. In practice, a shareholder of a limited liability company with a share of 25 % or more, as well as a sole shareholder of a joint stock company, will be automatically registered as a beneficial owner. Every authorized representative is obliged to double-check the automatic transcript and correct it if needed (incorrect data may be transcribed or the actual beneficial owner may differ from the one who is entered in the public register).
The Register of Beneficial Owners operated by the Ministry of Justice is currently not publicly accessible and not searchable. However, this will change as of 1 June 2021 as the Register will be publicly accessible and it will be possible to obtain an entry about a legal entity. It will be also possible to search in the Register by legal entities (not by sole proprietorship as we are used to from the Commercial Register).
The current legislation states the obligation to register a beneficial owner in the Register of Beneficial Owners but it does not state any sanctions for not doing so. There is a significant change in this area and it will affect every legal entity – not only fines will be introduced (up to CZK 50000) but also so-called private law sanctions which can fundamentally affect company´s operations:
There are two different deadlines for registering beneficial owners.
If a legal entity has fulfilled the obligation to register its beneficial owner under the current legislation, the inscription in the Register of Beneficial Owners must be adapted to the Act by 1 December 2021.
If the legal entity has not registered its beneficial owner so far, or has done so belatedly, it is obliged to register its beneficial owner promptly after the Act becomes effective, or more precisely by 15 June 2021.
The sanctions introduced by the Act on the Register of Beneficial Owners may significantly affect a company´s operations. If a company fails to register its beneficial owner in the Register of Beneficial Owners, company’s operations may be paralyzed. Do not hesitate to contact us, we will be happy to assist you with the identification of the beneficial owner and its subsequent registration.
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