Czech law on registration of ultimate beneficial owners has been changed again

In what begins to appear being a never-ending story, the Czech Act on registration of beneficial owners has been amended yet again. The amendment came into force on October 1st, 2022.

The amendment aimed to correct the previously incorrect implementation of Directive 2015/849 of the European Parliament and of the Council on the prevention of the use of the financial system for the purpose of money laundering or terrorist financing ("5th AML Directive"). The original Czech implementation was mainly criticised by the European Commission for inaccurately defining the ultimate beneficial owner(hereinafter “UBO”) and expanding the range of persons who do not have to declare its beneficial owner.

Why is this important?

Having correct entries in the register of UBOs is very important, in particular because in the event of an incorrect or missing entry, the Czech legal entity may not pay out to the not or wrongly identified UBO a share of profits, share on other own resources or share on the liquidation balance. Also, an unregistered UBO may not exercise voting rights or make decisions as a sole shareholder in the decision-making of the shareholder meeting of the Czech company. These prohibitions also apply to a legal person or to legal structure, of which the unlisted UBO is also the ultimate beneficial owner (in a multi-level ownership structure) or to a legal person that has no listed UBO. This basically means, that all shareholder votings, dividend payments etc. taken in such situation would be invalid and blocked.

At the same time, the respective Czech legal entity may be fined up to CZK 500,000 for its failure to comply with the legal obligation to register its UBO.

Legal changes

In the first place, the definition of the UBO has been changed by the amendment. It is now defined as "any natural person who ultimately owns or controls a legal person or legal structure". This has removed the previous duality between the terms "ultimate beneficial owner" and "person with ultimate influence", whereby these have been unified under a single term.

The amendment also changes the criteria for determining which natural person owns or controls a corporation. A corporation is now owned or controlled by a natural person who, directly or indirectly through another person or legal structure:

a)       has a share in the corporation or voting rights in the corporation of more than 25%;

b)      has a right to a share of profits, other equity or liquidation proceeds greater than 25%;

c)       exercises a controlling influence in a corporation that has a greater than 25% share in the corporation;

d)      exercises decisive influence in the corporation by other means.

For example, decisive influence is exercised by a natural person who can achieve that the shareholder meeting of the corporation submits to its will, or by a natural person who can appoint or remove a majority of the persons who are members of the statutory body of the corporation.
The law sets out these criteria alternatively, so it is enough to meet just one of them. Ultimately, this means that companies with a branching multi-tiered ownership structure may newly be required to list additional persons as UBOs beyond those that it has listed so far.

The range of corporations that do not have a UBO have also been limited. This exception will now apply only to the state and local self-government units and entities financed or decisively influenced by them. This means, that for example political parties, church or trade union organisations now also have to register their UBOs.


What to do

If the beneficial owner's details are identifiable from the so-called public register (in which all kinds of companies and other legal entities are registered), an automatic transcription into the UBO register took place during October 2022. If this was not possible, the legal entities concerned are obliged to correct or newly register their UBOs in the register of beneficial owners within 6 months since the amendment came into force, i.e. until the end of March 2023. If the legal entity´s UBO was already registered in the register of beneficial owners in accordance under the previous legislation, it still needs to be checked if it is now necessary to revise the registration in accordance with the new legislation.

We recommend checking whether the status entered in the register of beneficial owners corresponds with the reality and, in the event of a discrepancy, correcting the incorrect entry.

In case of queries, please do not hesitate to contact us.


UEPA advokáti s.r.o.