Beneficial ownership register

Published:
16. November 2021
Author:
  • Veronika Odrobinová
  • Aneta Koubková

As of 1 June 2021, we face new legislation on the issue of beneficial owners. Act No. 37/2021 Coll., on the registration of beneficial owners, is considerably stricter than the previous legislation and imposes unpleasant sanctions for non-compliance.

The new act applies to all persons established in the Czech Republic and trustees of trust funds that have their registered office, branch or are domiciled in the Czech Republic or otherwise have a relation to the Czech Republic (“registering persons”).

If you have not yet entered any information about the beneficial owner in the register yet, please pay attention when reading this text.

What are the penalties if no information about the beneficial owner is provided?
In addition to the risk of a fine of up to CZK 500,000, the law introduces additional sanctions in the form of a ban on the payment of profit sharing and a ban on the exercise of voting rights. A corporation may not pay a share in profit to an unregistered beneficial owner or to a corporation controlled by him, nor may a profit share be paid to a corporation that does not have a registered beneficial owner. An unregistered beneficial owner or legal entity without a registered beneficial owner must not vote at a general meeting either.

Companies wishing to tender for a public contract may also have a major problem. If they do not have a registered beneficial owner, the contracting authority will exclude them from the tender.

Banks and so-called obliged persons under the AML Act, including for example tax advisors and auditors, will also make problems in case of missing or incorrect entries in the register of beneficial owners. Obliged persons are obliged to report such discrepancies in the register of beneficial owners to the court. First they will point out the shortcomings to you, though. You may encounter this when filing tax return (if using the services of tax advisors), auditing financial statements and as a result of approving them.

Even dutiful people, who have already done the registration under previous legislation, should pay attention. The scope of the entered data has changed. In addition to the data on the beneficial owner, data on the structure of the relations are now registered. Therefore, check and update your details in the register of beneficial owners if necessary. Attention should also be paid to those business corporations that have already listed so-called substitute beneficial owners (members of the statutory body) in their register before the new law came into effect. Under the new rules, the beneficial owner in such cases is likely to be a member of the statutory body (more precisely, a person in the top management) of the corporation with ultimate influence, i.e., the corporation at the top of the ownership structure. Even such irregularities must be pointed out by the so-called obliged persons.

The end of November is approaching
If the registering persons have duly registered their beneficial owners according to the previous legal regulation (i.e. they have registered their beneficial owners by 1 January 2019 or 15 days after their establishment), they must bring this registration into compliance with the new regulation by 1 December 2021. In addition, by recording the changes in the register within the specified period, they will save CZK 4,000, which is the amount of the court fee for registration in the register.

However, for registrants who have not yet made any registration, this deadline does not apply and they are thus violating the law. They should register without delay. They will then not be able to avoid paying the court fee.

It may take time
If you know that you are pressed for time with the beneficial owner registration (you need the beneficial owner to vote at the general meeting, etc.), you should consider that the registration process itself can take up to a month. Courts have no time limit for registration, so it depends on the workload of the court clerk, to whom your application is assigned. This can be avoided by registering through a notary, who tends to be more flexible. Even so, it must be taken into account that obtaining the necessary supporting documentation, especially in cases of foreign ownership structures, may also take a considerable amount of time.

If you feel lost in the issue of beneficial owners’ registration, please, do not hesitate to contact us. At Grant Thornton, we will be happy to advise you.

Author: Veronika Odrobinová, Aneta Koubková