Czech Republic: Additional disclosure duties under the new Beneficial Owners Act
As of on 1 June 2021, the Czech Beneficial Owners Act (officially Act No. 37/2021 Coll. on the Register of Beneficial Owners) brings a number of new publication duties and obligations for companies in the Czech Republic and also introduces sanctions for incorrect or insufficient disclosure of mandatory information. The act aims to implement the fifth EU Anti-money laundering directive into Czech law.
The new act defines a beneficial owner (further “UBO”) as any natural person who is the ultimate beneficiary or who has ultimate control. The threshold for this qualification is either receiving more than 25% of the benefits of the company or having more than 25% of all votes.
A significant change from the old law is the necessity, in case no specific person can be identified as the beneficial owner under the criteria indicated above, to register the Director(s) of the final parent company as the UBO(s). Under the old law, in the same situation, the Director(s) of the company for which the registration was made had to be named as its UBO(s). Therefore, all companies without an identifiable natural person fulfilling the 25% criteria, now have to re-register their UBO.
Another important change is the introduction of sanctions for failing to register the UBO. These sanctions have both civil and public law aspects deigned to motivate the proper registration of the UBO.
Firstly, if the UBO of a company is not properly registered, it will not be allowed to pay any profit share out to the UBO or legal entities of which the unregistered UBO is likewise the UBO.
Secondly, neither the unregistered UBO, nor any legal entity of which the unregistered UBO is likewise the UBO, will be allowed to exercise his/its voting rights at General Meetings or to take decisions as a sole shareholder.
Thirdly, there is the risk of a fine. A legal person who fails to register the UBO properly and on time may be fined up to CZK 500,000. The real UBO is not free of risk either as he is exposed to the same fine in case he does not provide full cooperation to the registering entity. However, this last sanction may only be imposed in case of failure to amend discrepancies in the Beneficial Owner Register despite having received a notice to amend with a reasonable correction period set by the registration court.
Good news for companies, whose UBO is clearly identifiable from the commercial register, is that the commercial register will automatically carry over that information to the Beneficial Owner Register. In all other cases, the current practice is that the register will accept an affidavit from the company that states the company’s structure and its UBO(s) and the mandatory identification data regarding the UBO(s).
This brings us to the last aspect of the Beneficial Owners Act – The mandatory information about the UBO. The Beneficial Owners Register will require the UBO’s name, country of residence, his year and month of birth, citizenship and fulfilled criteria for being the beneficial owner – i.e. having more than 25% of all voting rights, receiving more than 25% of the benefits etc.
In conclusion, we would like to stress the necessity to fully comply with the obligation to register the UBO in order to prevent future unnecessary legal and financial difficulties.
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