1 October 2022 is the date when the amendment to Act No. 37/2021 on the register of beneficial owners (“Register of Beneficial Owners Act” in Czech language) comes into force after being approved by the Chamber of Representatives on 7 July 2022, passed by the Senate and then signed by the President. The amendment was adopted on the basis of a request from the European Commission, which accused the Czech Republic of failing to meet its obligations by improperly implementing/transposing the so-called 5th AML Directive. The Commission made the drawing of funds under the National Recovery Plan conditional on this amendment, so the government had to draft the amendment to the Register of Beneficial Owners Act as soon as possible.
The amendment thus directly covers the points raised by the Commission. The key issue is the definition of the beneficial owner. Specifically, no distinction will be made between the “person with ultimate influence” and an “ultimate beneficiary”; instead, the beneficial owner will be any natural person who ultimately owns or controls a legal person or a legal arrangement.
The basic criterion for determining the beneficial owner will therefore be only direct or indirect ownership or control, or controlling influence, and whether the beneficial owner is material (newly contained only in Section 4 of the Register of Beneficial Owners Act) or “formal” (newly contained in Section 5a of the Act). The amendment also narrows down the group of persons without a beneficial owner (Section 7 of the Act).
It follows from the above that other persons than those previously considered beneficial owners under the current wording of the Register of Beneficial Owners Act will now need to be registered as beneficial owners.
In practice, it will mean that business corporations and other obliged persons should verify whether their current entry in the Register of Beneficial Owners meets the new criteria for determining the beneficial owner within 6 months of the effective date of the amendment. If they find that this is not the case, they will need to change the entry in the Register of Beneficial Owners.
In addition, the obligation to register the beneficial owner is newly extended to some entities which were not previously obliged to do so. They include, without limitation, district and regional chambers, political parties, churches and religious societies, and owners’ associations. For some of them, however, the entry should be made automatically. Therefore, this change should not carry any additional administrative costs. Court fees will also be waived for those entities which have met their registration obligation under the current legislation but will need to modify the registration details under the amendment. However, this does not apply if the entry is made directly through a notary.
In conclusion, we would like to remind you that failure to register the beneficial owner may result in problems in the company’s routine business (e.g. in handling various applications, in the form of refusal to provide services such as opening a bank account, termination of a current contractual relationship ,etc.) The ultimate consequence may be the imposition of a fine of up to CZK 500,000 by a court and the prohibition of any payments made to such a person.