Fundamental changes in the legislation concerning registration of beneficial owners

Schaffer News

Beneficial owner

The amended legislation defines the concept of beneficial owner much more broadly and precisely, covering also entities that are obliged to enter their beneficial owners in the Register or, conversely, entities that do not have this obligation (e.g. legal entities established by law or an international treaty, state and national enterprises, district and regional chambers, union organisations, associations of unit owners, legal entities in which the state, region or municipality has the entire or partial interest, etc.).

Newly, any natural person who is the final beneficiary or who exerts final influence will be considered the beneficial owner. The final beneficiary is a person who can, directly or through another person, benefit significantly from the activity or liquidation of a legal entity or from the administration or termination of a legal arrangement, and who does not pass on that benefit to another person. If it is not possible to identify the beneficial owner even with every effort that may be required or if such a person does not objectively exist, the beneficial owner will be a so-called person in top management position – i.e. a person who actually ensures the day-to-day management of the business corporation (e.g. CEO).

Documents submitted

Documents on data obtainable from the public administration information system, which can be accessed by court by remote access, will no longer have to be submitted.

It is also essential that for documents submitted in the Czech language a simple copy will be sufficient; for documents in a foreign language, it will be necessary to submit the original and, simultaneously, only a non-verified translation into Czech or, as the case may be, the court decision may not require any translation at all.

Entry of the beneficial owner in the Register

Given that the entry in the Register under the current legislation does not have the nature of registration procedure, the court considers the entry of data only formally, not examining the accuracy of the data entered in the Register. Therefore, the notification that the entry has not been made should only occur exceptionally, for example, if the data to be entered are not documented at all or if the documents cannot prove the beneficial owner. The decisive factor is ultimately the “free” consideration and interpretation of the concept of beneficial owner by the competent court official.

What has returned is the concept of registration procedure, where the court decides by resolution. Appeals will not be admissible against resolutions, but if the court rejects an application for beneficial owner registration, it will state the reasons for such rejection, instructing the applicant how to rectify the application deficiencies.

Automatic copying

The main purpose is automatic copying of the beneficial owner data from the Commercial Register and other public registers, provided that the data from such a register meets the requirements laid down by the Beneficial Owner Register Act for beneficial owner registration (e.g. in a limited liability company, it will be the shareholder registered in the Commercial Register with a share of more than 25%).

There is no doubt that the use of this new regulation will be very practical in the future, given registrants’ obligation to keep the data in the Register up to date. However, it should be pointed out that automatic copying will not take place “automatically” in the case of registrants whose beneficial owner has already been entered into the Register. First, it will be necessary to send an application to the competent court to copy their beneficial owner automatically in the future. This application will also be subject to a fee.

Possibility of the public to access the Register

At present, the Register is conceived as non-public, and third parties (with some exceptions) do not have access to the data entered. The Beneficial Owner Register Bill stipulates that anyone can obtain, via the Internet, an electronic extract of the beneficial owner’s data to a limited extent. As is the case today, the registrant will be obliged to keep and continuously record complete, accurate and up-to-date data to establish and verify the identity and status of its beneficial owner. This obligation becomes even more important, because the Beneficial Owner Register Bill, as we have informed you, introduces fines for registrants, in this case up to CZK 250,000.

The Beneficial Owner Register Bill brings a number of changes and new institutes which, individually and in mutual connections, contribute to greater transparency of ownership structures of registrants. In view of the new possibilities and obligations of registrants, you should pay attention to future developments in beneficial owner registration and be duly prepared for it.