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  • The New Responsibility of Legal Persons to Disclose their Beneficiary Owner

    21. 09. 2017

    On January 1st, 2018, the amendment to law No. 304/2013 Coll., on public registers of legal persons and individuals, will come into effect. This amendment stipulates the creation of a register of the beneficiary owners of legal persons and trust funds. Legal persons will then have a new responsibility to disclose their beneficiary owner(s) to their pertaining registry court.

    The law stipulates that a beneficiary owner is an individual who has a factual or legal right to exercise direct or indirect influence over the legal person. This is a substantive definition of the beneficiary owner, and the law goes on to specify which individuals are considered true beneficiary owners in the case of individual legal persons (a so-called rebuttable presumption.)

    In the case of business corporations, a beneficiary owner is considered to be an individual who independently or in concert with other individuals exercises more than 25 % of the voting rights in this business corporation or has more than a 25% share in its registered capital. A beneficiary owner is also an individual who, alone or in concert with others, controls the business corporation, and an individual who receives at least 25 % of the profits of this corporation. If the corporation does not have a beneficiary owner, or if it is not possible to discern them according to the rules listed above, for the purpose of public registers the beneficiary owner will be considered to be a member of the corporate body, a representative of the owner in the corporate body, or a person in a similar position to a member of the corporate body. The beneficiary owners of associations, public benefit societies, housing associations, churches and religious organizations are determined in the same way as stated above.

    In the case of foundations, institutes, charitable funds, trust funds and other organizations without legal personality, the beneficiary owner is considered to be an individual or the owner of the legal person who is
    • the founder,
    • the trustee,
    • the beneficiary,
    • the individual in whose interest a foundation, institute, charitable fund, trust fund or other organization without legal personality was founded or is active, unless a beneficiary has been named, and
    • the individual authorized to oversee the activities of the foundation, institute, charitable fund, trust fund or other organization without legal personality.

    Legal persons and trust funds must record their beneficiary owner into the registry without unnecessary delays after January 1st, 2018, when the amendment comes into effect.

    The court will register a beneficiary owner on the basis of documents which indicate the identity of the beneficiary owner. The law does not specify, however, which documents will suffice to identify the beneficiary owner. We may only assume that the main method of identifying a beneficiary owner will be an affidavit (statement on honor). A notary may also assist in entering information about the beneficiary owners, similarly to how companies are registered in the Commercial Register – the prerequisite for this will be a notarial deed containing information about the beneficiary owner.

    The law does not set sanctions for the failure to identify and disclose a beneficiary owner. However, we cannot rule out that failure to register one´s beneficiary owner will be penalized on the basis of other laws.

    Information about the beneficiary owner is not published in the abstract of the public registry nor is it released publicly in any way. Access to this information is granted to courts, law enforcement bodies, intelligence services, financial intelligence units, banks and other entities which must identify their clients, public funds providers, bailiffs, and insolvency administrators. Further, anyone who can prove interest in connection with preventing certain types of crime (for instance money laundering, accessoryship, terrorist attacks) may be granted access.

    Though the database will be active starting January 1st 2018, legal persons and trust funds are required to submit up-to-date information to identify their beneficiary owner, including information proving the position of the beneficiary owner and why that individual is considered a beneficiary owner, starting January 1st, 2017. These documents must be retained by the respective persons the entire time that the beneficiary owner exists, and at least 10 years after the end of their status as a beneficiary owner.

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