What does the beneficial owner registration requirement comprise?
Generally, the requirement includes the obligation to disclose and register information about beneficial owner(s), including their name, date of birth, place of residence and citizenship, and most importantly, details about the beneficial owner's voting rights or shares in the legal entity, or other facts establishing that he or she is a beneficial owner of the legal entity.
Who is affected by this obligation?
Practically, all legal entities that are registered in Czech public registers, ie in the Register of Associations (spolkový rejstřík), Register of Foundations (nadační rejstřík), Register of Institutes (rejstřík ústavů), Register of Associations of Unit Owners (rejstřík společenství vlastníků jednotek), Commercial Register (obchodní rejstřík) and Register of Public Service Companies (rejstřík obecně prospěšných společností), as well as all trusts registered in the List of Trusts (evidence svěřenských fondů), will need to disclose and register information about their beneficial owner(s) in the Beneficial Ownership Register by certain deadlines.
How do we assess who a beneficial owner is?
A beneficial owner is any natural person who has – by factual or legal means – directly or indirectly a material influence over a legal entity, trust or other entity without legal personality, provided that such influence is exercised. In principal, a natural person who owns 25 % of the shares in a legal entity or is entitled to equivalent voting rights or is a beneficiary of an equivalent stake in profits of such an entity is considered to be a beneficial owner. Most importantly, should the management of a legal entity still be unable to positively confirm the identity of such a person after a due and careful examination, then the statutory body of that legal entity will be considered the beneficial owner(s).
Who is obliged to discharge the registration duty?
Generally, members of statutory bodies of the respective legal entities are obliged to file a submission for registration of the information of the beneficial owner in the register.
Are there any associated costs?
Yes, the registration is subject to a court fee of CZK 1,000 (ie approx EUR 38.50). In each case, there is a one-year fee waiver for legal entities registered in public registers before 1 January 2018.
What are the consequences of noncompliance?
Should the relevant legal entity fail to register the information of the beneficial owner, it may be subject to a penalty of up to CZK 100,000 (ie approx EUR 3,850). There is a risk that such a penalty may be imposed recurrently should the failure remain unremedied. In addition, the members of the entity's statutory bodies may be held liable for breach of their duty to act with due managerial care in this respect.
What needs to be done and by when?
Currently, all affected legal entities have to wait for the Ministry of Justice of the Czech Republic to publish (with a final date not yet set) implementing legislation providing details of beneficial owner(s) registration forms. In the meantime, we encourage the affected legal entities to collect all documentary evidence and information concerning identification of their beneficial owner(s) and to proceed to verify their status. Once the registration forms become available, the members of the legal entity's statutory body need to file the submission for registration of the beneficial owner(s) accompanied by the respective information evidencing this. The Commercial Court normally registers the information within five business days from lodgement of the submission. Legal entities registered in public registers before 1 January 2018 should, as we understand the rationale of the legislation (with the law being unclear on timing), submit so that the information on beneficial owners is registered as of 31 December 2018 at the latest. For other legal entities, we believe that the deadline for submission will expire on 1 January 2020 (or one year earlier, depending on the interpretation of the ambiguous legislation).
Purpose: to prevent corruption, money laundering and terrorism financing via increased transparency of ownership of defined legal entities.
Affected / obliged legal entities: all legal entities registered in Czech public registers.
New managerial duties: management is obliged to fulfil the registration obligation on behalf of the relevant legal entity and, in certain cases, may be considered beneficial owner(s).
Sanctions: a penalty for non-compliance may be imposed upon the affected legal entity.
Deadlines: legal entities registered in the Commercial Register must likely discharge the registration obligation by 31 December 2018; for other legal entities the deadline for submission expires likely on 1 January 2020.
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