The law on registering beneficial owners is approaching, are you ready?

Published:
30. March 2021
Author:
  • Veronika Odrobinová
  • Jiří Mačát
  • Aneta Koubková

By June 1, 2021, a new law on registering beneficial owners[1] (hereinafter "ZESM") will come into force. What do you need to watch out for?

Change in the definition of beneficial owner

The definition of a beneficial owner, which was previously regulated in the AML Act[2], is replaced by a slightly more detailed definition in the ZESM (Act on registering beneficial owners).

In general, the beneficial owner is now every natural person who is:

  1. the final beneficiary; or
  2. the person with ultimate influence

In most situations, the circle of beneficial owners will be the same as under the AML Act, but this is not always the case. The designation of a different person as the beneficial owner occurs, for example, when the beneficial owner cannot be determined according to the basic criteria and will thus be a member of the statutory body or senior management (or his representative for a legal entity). According to the AML Act, in this case, the beneficial owner is a member of the statutory body, or his representative directly of that business corporation. With ZESM, the beneficial owner will also be a member of the top management (usually a member of the statutory body) of a business corporation, who is a person with the ultimate influence, i.e. at the top of the imaginary structure of relationships. Therefore, it must be verified whether, according to the new definition, there has been no change in the circle of persons who are the beneficial owners

Extending the extent of the recorded data on the beneficial owner

The extent of data entered in the register of beneficial owners is now extended and a description of the structure of relationships must be added, if any, including the names, companies and identification numbers of persons appearing in it, as well as information about the day from which and to which the natural person is the beneficial owner.

Automatic transcription

For business corporations where the ownership structure is clear from the data entered in the Commercial Register (usually companies with a single partner or sole shareholder), the beneficial owners will be transferred to the register automatically.

What if I don't register the beneficial owner?

If the beneficial owner of the business corporation is not registered in the register of beneficial owners:

  • this business corporation may not pay a share of the profits to the beneficial owner or to the legal entity or trust fund of which he is also the beneficial owner.
  • another business corporation may not pay to this business corporation a share of the profit, while the right to a share of the profit or other own resources, which was not paid by the end of the accounting period in which it was decided to pay it, expires.
  • the beneficial owner in the decision-making of the highest body of this business corporation may not exercise voting rights or decide as the sole shareholder, nor the legal entity of which he is also the beneficial owner.

Voting rights in a business corporation may not be exercised or decided as the sole shareholder in the decision-making of the highest body by a legal entity that does not have a beneficial owner registered in the register of beneficial owners.

 

There could be a large fine                                

Fines of up to CZK 500,000 can be imposed for offenses under the ZESM.

A person registered in the register of beneficial owners (hereinafter the “registrant”) may commit an offense if

  • he does not enter any data in the register of beneficial owners, or
  • does not make sure, even within 15 days from the decision coming into legal force on the irregularity, that the new data is entered in the register of beneficial owners [3].

The beneficial owner may commit an offense by failing to provide the registrant with the necessary co-operation to meet his obligations under the ZESM.

When do I have to register properly by?

Registrants who are not business corporations, and

  • have not yet been entered in the relevant records, must do so by 1 December 2021 at the latest;
  • have already registered in accordance with the previous legislation, must make sure that the registration complies with the requirements of ZESM by 1 June 2022.

Registrants that are business corporations, and who

  • have already registered by the statutory deadline according to the AML Act, must make sure that the entered data complies with the requirements of ZESM by 1 December 2021;
  • have not yet made an entry in the relevant records or have not made it by the legal deadline, although they had to do so, must do so without undue delay after the ZESM comes into force, i.e. on 1 June 2021.

If you are not sure how to proceed with regard to the new law on registering beneficial owners, contact us and we will be happy to guide you through the entire process.

 

[1] Act No. 37/2021 Coll., on Registration of Beneficial Owners
[2] Act No. 253/2008 Sb., on Certain Measures against Money Laundering and Financing of Terrorism, as amended
[3] The court decides on the irregularity on the basis of a notification (e.g. a public authority) or on its own initiative

Author: Veronika Odrobinová, Jiří Mačát, Aneta Koubková