Initiated by the European Commission with the aim to ensure correct implementation of Directive (EU) 2015/849 of the European Parliament and of the Council on the prevention of the use of the financial system for money laundering or terrorist financing (“AML Directive”), the Act No. 37/2021 Coll. on the registration of beneficial owners (“ZESM”) has been amended with effect from 1 October 2022.
Changes to the Notion of “Beneficial Owner”
Namely, the notion of “beneficial owner” has been simplified by abandoning the concept of ultimate beneficiary or person with ultimate influence. Now, a beneficial owner is any natural person who effectively owns or controls a legal person or a legal arrangement.
Section 4(1) of the amended ZESM defines criteria for a person who effectively owns or controls a corporation. These include ownership of a share in the corporation or a share of voting rights greater than 25% or a right to a share of profits greater than 25%. However, the Act also covers other means of exercising decisive influence. These means of exercising decisive influence are specified in other provisions.
Narrowing the Range of Entities without a Beneficial Owner
An important change is the narrowing of the definition of entities that are not subject to the obligations resulting from beneficial ownership. Section 7 of the amended ZESM specifies entities that do not have a beneficial owner by law. These include mainly the state as such and territorial self-governing bodies and entities financed or controlled by them. Certain entities are subject to a rebuttable presumption of the absence of a beneficial owner, including, for example, legal entities established by law or educational legal entities established by the state.
Compared to the previous legislation, this list of entities no longer includes, for example, unit owners’ associations, trade unions, political parties or hunting associations.
Obligations of Entities in Connection with the Amended ZESM
The new statutory definition of beneficial owner does not entail an obligation for most entities registered in the Register of Beneficial Owners (“Register”) to change their existing registration, since within 1 month from the entry into force of the amendment, the registered data in the information system of the Register will be automatically adjusted to correspond to the new provisions of the ZESM.
Information already recorded in the Register that no longer needs to be entered in the Register after the amendment takes effect will be disregarded and will therefore not cause any inconsistency. However, such information may be deleted on application or request only.
The law provides for a 6-month period from the entry into force of the amendment to bring the data in the Register in line with the new legislation. This applies to both to existing entries which are incomplete under the amended legislation, i.e. the beneficial owner is not recorded in the Register, even though they are supposed to be recorded under the law, as well as to those entities which were not subject to the obligation to register under the legislation before the amendment.
In view of the above, we recommend that you consider the possible effect the amendment may have on your company, check the automatic adjustments in the Register and, if necessary, correct any discrepancies in the entry.
Felix a spol. stand ready to assist you in making your company’s registration compliant with the law and to work with you in fulfilling the above obligations.
Author: Mgr. Julie Suchá, Articling Clerk, Felix a spol. advokátní kancelář, s.r.o.