On June 1, 2021, the Act on Beneficial Owners Register comes into effect. While the register has existed since 2018, the new Act changes it fundamentally. Under the new Act, not only is it mandatory to create a record of the beneficial owner, but failure to do so can result in severe sanctions that may completely paralyze the activities of legal persons. Should you be concerned by the new Act, and how to anticipate its sanctions?
On June 1, 2021, the Act on Beneficial Owners Register comes into effect. The Act transposes new EU legislation and unifies legal regulation within the Czech legal order. The register was first established on January 1, 2018, from which date companies have been required to find their beneficial owners and create a record of them in the register. Nevertheless, there was no statutory sanction to ensure compliance, causing many companies to not be concerned by the register at all. However, under the new Act, failure to comply with the requirements can attract severe statutory sanctions, both financial and otherwise.
The obligation to have a record of the beneficial owner applies with some exceptions not only to companies, but to all legal persons, which are defined under the Act as so-called Registrant-Persons and trust funds. Legal persons that do not have a beneficial owner by law, such as le territorial self-governing units, contributory organizations, legal persons established by law or international treaty, political parties and movements, churches and religious societies, or associations of unit owners (SVJ), do not register beneficial owner.
Who are beneficial owners?
A beneficial owner is every natural person who is an ultimate beneficiary or ultimate influencer. One legal person could have more than one beneficial owner (typically 1-3). A different legal person cannot be a beneficial owner either. If, in relation to one legal person, there is a different legal person appearing as its ultimate beneficiary or ultimate influencer, the beneficial owner of the former will be every natural person who is the beneficial owner of the latter.
An ultimate beneficiary is legally defined as a person who is able to directly or indirectly acquire more than 25 % of the total property benefit that is created by activities or liquidation of a legal person, or administration or dissolution of a trust fund, and does not pass the benefits any further.
An ultimate influencer is legally defined as a person who is able to directly or indirectly influence the activities of a legal person, without having to follow instructions from someone else.
The Act also establishes that if a beneficial owner cannot be identified even with all effort that may reasonably be required, every person who is in its top management will be considered the beneficial owner.