Beneficial owner registration – the new rules are here!

Published:
28. May 2021
Author:
  • Veronika Odrobinová
  • Aneta Koubková

Today, that is 1 June 2021, the new act no. 37/2021 Coll., the Beneficial Owner Registration Act (“the act”) is coming into operation. It newly connects perceptible sanctions to the failure to comply with the obligations it lays down. Therefore, if your company has not registered its beneficial owner yet, it ought to do so as soon as possible.

Sanctions

A business corporation that will not ensure registration of beneficial owners without undue delay after the act takes effect, that is after 1 June 2021, will be committing an infringement and will face the risk of a fine up to CZK 500,000 being imposed.

Moreover, this business corporation must not pay profit sharing to an unregistered beneficial owner or a business corporation or legal structure controlled by him and profit sharing must not be paid to a business corporation, which does not have a registered beneficial owner, either. An unregistered beneficial owner or legal entity without a registered beneficial owner must not vote at a general meeting either.

Companies, which want to attend tenders for public procurement after 1 June 2021, may also have a great problem. If they will not have a registered beneficial owner, the contracting authority will exclude them from the tender.

Automatic copy

Despite not having registered their beneficial owner yet, companies that are subject to the so-called automatic copy can remain calm. This is a new thing the act brings. Due to automatic copy, the data on beneficial owners from the trade register will automatically be copied in the beneficial owners register. This, however, only applies to companies, which have a simple ownership structure and for which the beneficial owner is evident from the extract from the company register already. For limited liability companies, a partner with a stake higher than 25 % or the actual owner of the company registered in the company register, which is a partner in the limited liability company with a stake higher than 25 %, will thus automatically be copied as the beneficial owner. For joint stock companies, the automatic copy applies similarly for a sole shareholder.

We have registered

Even companies that have already performed the registration, may not be safe yet. The act widens the scope of registered data, adding especially the data on complete ownership structure of the company. Moreover, the information on ownership structure needs to be proven at court, by presenting simple copies of corporate documents (an extract from the list of partners/shareholders, extracts from public registers etc.)

In case of companies with more complex, especially international ownership structure, obtaining the necessary documents may pose some difficulties. All of these documents need to be translated into the Czech language, which may result in considerable costs. According to the new act, the entry in the register should be made by 1 December 2021, in the case of business corporations, which made the original registration within the statutory deadline (by 1 January 2019, if incorporated by 31 December 2017, or within 15 days from its incorporation, if incorporated from 1 January 2018 onwards). If the entry was not made within the statutory deadline, the data need to be adjusted without delay after 1 June 2021.

A member of the statutory authority is registered as the beneficial owner

A significant change applies to business corporations, which had specified their beneficial owner using a fiction of law (under article 4 paragraph 4) letter a) item 4 of the AML act). According to the old legal regulation, in case the beneficial owner could not be determined, a member of the statutory authority of this business corporation was entered as the beneficial owner. Newly according to the act, a person that is in the top management of the corporation (i.e. a person, which is a member of the statutory authority or a person directly subordinated to the statutory authority or its member, and which ensures daily or regular management of the performance of activities of the legal entity) is entered in such a case. A person in the top management need not necessarily be a member of the statutory authority.

In the case of companies, where the person with end influence (i.e. the person at the top of the structure of the relationship structure) is a legal entity, for which the beneficial owner cannot be determined, it applies that every person in its top management is also the beneficial owner of all corporations in the relationship structure subordinated to it. As a result, the beneficial owner will not be the person in the top management (most frequently a member of the statutory authority) of the corporation performing the entry, but the person in the top management of the corporation at the top of the relationship structure. Entries already made should be adjusted in this respect.

Control of data accuracy

Do not be lulled by the idea that no one will inspect the accuracy of data entered in the beneficial owners register anyway. The opposite is actually true. All obliged entity under the AML act (banks, tax consultants, accountants, attorneys etc.), who detect an inconsistency in the data in the beneficial owners register during identification and control, are obliged to report this inconsistency to the court (after prior notice to the client). If the inconsistency is a serious one, the court will initiate a proceeding on inconsistency, which may result in the sanctions mentioned at the beginning of this article.

If you are not certain, who the beneficial owner of your company is, about the accuracy of registered data or you need any advice or assistance relating to the new Beneficial Owner Registration Act, please, do not hesitate to turn to us. We will be happy to help you find your bearings in this issue.

 

Author: Veronika Odrobinová, Aneta Koubková