In this legal circular, we shall address the newly adopted Act on the Register of Beneficial Owners, which shall enter into force on 1 June 2021. In addition to the proper transposition of certain requirements of the directives of the European Parliament and of the Council of the EU, this Act aims primarily to revise this institute and ensure greater transparency of legal persons. Furthermore, it is to bring more effective means in the fight against money laundering and terrorist financing, and last but not least, to strengthen certainty in commercial transactions.
Upon the Act entering into force, a new register of beneficial owners shall be established in the Czech Republic, which shall replace the original register of beneficial owners and take over a substantial part of the data from the original register of beneficial owners. The public shall have newly access to the new register of beneficial owners. From this register, it shall be possible to obtain an extract of valid data on the beneficial owner. An application for registration in this register shall be submitted electronically by means of a form on the website of the Ministry of Justice. Registration may also be carried out by a notary by direct entry.
A substantial change in the legal regulation is the so-called automatic transcription, which shall facilitate the administration of a substantial part of legal persons connected with the register of beneficial owners. Automatic transcription should occur primarily where the registering person has not ensured the registration of other data (by application to the court or by request to a notary). Legal persons which have already actively registered the data of their beneficial owners shall also have the possibility to introduce a regime of automatic transcription in the future. Automatic transcription shall occur in the case of the majority of private limited companies (společnost s ručením omezeným) and in the case of a part of joint-stock companies (akciová společnost). As the beneficial owner of a private limited company, that member shall be transcribed who has more than a 25% share (or the registered beneficial owner of a legal person which has more than a 25% share). As the beneficial owner of a joint-stock company, its sole shareholder shall be registered (or the registered beneficial owner of a legal person which is the sole shareholder). Members of statutory bodies shall also be automatically transcribed in the case of associations (spolky) (and similar persons) and housing and social cooperatives (bytová a sociální družstva). Automatic transcription should occur, where possible, upon any change in the entry in the Commercial Register (obchodní rejstřík).
Registration of the beneficial owner shall therefore have to be carried out, in addition to cooperatives, particularly by joint-stock companies which do not have a sole shareholder registered and further by companies in respect of which automatic transcription does not occur for any reason (in particular companies with a foreign member/shareholder or companies whose member shall be another legal person without a registered beneficial owner).
The Act on the Register of Beneficial Owners introduces, as opposed to the original legal regulation under which there were no sanctions, a number of new sanctions. Where the beneficial owner of a business corporation (obchodní korporace) is not registered in the register of beneficial owners: • this business corporation must not pay out a share in profit to him, nor to a legal person or legal arrangement of which he is also the beneficial owner; A business corporation must not pay out a share in profit also to a legal person or legal arrangement which does not have any beneficial owner registered in the register of beneficial owners. The right to a share in profit or other own resources which has not been paid out for the above-stated reasons by the end of the accounting period in which a decision on its payment was made shall cease to exist. • neither he, nor a legal person or the person acting on behalf of a legal arrangement of which he is also the beneficial owner, must exercise voting rights when the supreme body of this business corporation decides or decide as its sole member. Voting rights in a business corporation must also not be exercised when the supreme body decides, or a decision made as its sole member, by a legal person or the person acting on behalf of a legal arrangement which does not have any beneficial owner registered in the register of beneficial owners. Where the sole member has decided in breach of the above, the invalidity of this decision may be invoked.
Furthermore, the Act on the Register of Beneficial Owners introduces a sanction mechanism in the event of non-fulfilment of the registration obligation. Where no data is registered in the register of beneficial owners or where a discrepancy established by the court is not ensured to be corrected, a fine of up to CZK 500,000 may be imposed. A fine may also be imposed on the person who, by his non-cooperation, caused a discrepancy in the register of beneficial owners.
Ondřej Bahník, Advocate
Law Firm Mašek, Kočí, Aujezdský
This text was originally prepared by the law firm Mašek, Kočí, Aujezdský in cooperation with the Association for Electronic Commerce (APEK) as legal circular No. 02/2021 intended for members of this association.
This text was translated from Czech to English using an AI translator.