With effect from 1 January 2018, legal entities and trusts have been subject to a new obligation to record beneficial ownership in the register of beneficial owners. The public register has been established by an amendment to Act No. 304/2014 Sb., on Public Registers of Legal Entities and Individuals and on the Register of Trusts (“Register Act”). The amendment has implemented EU law. Some of these issues are also set out in Act No. 253/2008 Sb., on Certain Measures against the Legitimisation of Proceeds of Crime and the Financing of Terrorism (Anti-Money Laundering Act). The purpose of the new regulation is to prevent the use of the financial system for money-laundering and terrorism financing.
A beneficial owner is an individual who has a factual or legal possibility of exercising, directly or indirectly, significant control over a legal entity, a trust or any other legal association without legal personality.
A beneficial owner of a company is deemed to mean an individual who has a factual or legal possibility of exercising, directly or indirectly, significant control over a company. Further, the Act prescribes a rebuttable legal assumption that the beneficial owner is a person that has a possibility of exercising significant control and at the same time, (i) a person who, either alone or jointly with others acting in concert with him, holds more than 25 per cent of the voting rights in the company or more than a 25 per cent share in the registered capital; or (ii) controls the person sub (i) alone or jointly with others acting in concert with him, or is the recipient of at least 25 per cent of the profit of the company.
Where beneficial ownership cannot be determined or is non-existent, a legal fiction arises that the beneficial owner is the company’s director or officer or a person in a similar position. Application difficulties will probably result from the fact that the director or officer must also fulfil the condition of significant control over the company.
The register of beneficial owners is kept electronically as a public administration information system and is maintained by the commercial court of competent jurisdiction. The register is not a public register within the meaning of the Register Act. As a result, it is not subject to the Register Act regime applicable to public registers. Practical consequences of this are deviations in the prescribed course of the proceeding, a limited number of entities that may inspect the register, and the absence of direct penalties for a failure to comply with the duty to state the beneficial owner.
As a result, legal entities face no risk of penalty or dissolution with liquidation for a failure to enter information about the beneficial owner. However, some consequences associated with the failure to fulfil the duty may arise from other laws, such as the Public Procurement Act, the Insolvency Act, or the Anti-Money Laundering Act.
Information entered in the register of beneficial owners is currently available only to persons and authorities defined by the law in connection with the performance of their statutory duties (such as courts, investigating, prosecuting and adjudicating bodies, Financial Analytical Authority, Supreme Audit Office, and Czech National Bank) and to those persons who substantiate an interest in connection with the prevention of crime.
Legal entities entered in the Commercial Register must record their beneficial owners by 1 January 2019. Other legal entities entered in other public registers (including trusts entered in the register of trusts) must record their beneficial owners by 1 January 2021.
The record of a beneficial owner (or a change in the record) is exempt from the court fee until 31 December 2018. After this date, the fee for the beneficial owner registration will be CZK 1,000.
Information about beneficial ownership is recorded either by the commercial court of relevant jurisdiction or by a notary. An intelligent form has been prepared for applications for registration that can only be filled in electronically. The form as well as other important information is available on the website of the Czech Ministry of Justice at HERE.
Please do not hesitate to contact us if you have any questions regarding this new obligation.