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.
- Legalink News: Covid-19 Pandemic in Czech Republic (01. 04. 2020)
- Current information Covid-19 / Employee Confirmation (16. 03. 2020)
- COVID-19 IMPLICATIONS FOR LABOUR RELATIONS (11. 03. 2020)
- THE REAL ESTATE BROKERAGE ACT (11. 02. 2020)
- AMENDMENT OF THE ACT ON THE RESIDENCE OF FOREIGN NATIONALS IN THE CZECH REPUBLIC AND CHANGES TO THE EMPLOYMENT REPORTING OBLIGATIONS (10. 10. 2019)
- Not registered in the Register of Beneficial Owners yet? What else you can manage to do by the end of the year? (26. 09. 2019)
- On the Draft Legislation on the Protection of Whistleblowers (19. 09. 2019)
- Legal governance of professional athletics in the Czech Republic (22. 08. 2019)
- Item of News - Personal Data Processing Act (31. 05. 2019)
- Personal Data Processing Act Adopted, Including New Rules on the Handling of Personal Identification Numbers (29. 03. 2019)
- Grace Period for Work Incapacity Abolished as of July 2019 (01. 03. 2019)
- Amended Trademark Law takes effect as of January 2019 (13. 02. 2019)
- Recording of beneficiary owners (26. 10. 2018)
- Laws and regulations in the pipeline businesses should watch out for towards the end of the year (13. 09. 2018)
- Amendment to the Public Procurement Act (30. 01. 2018)
- Vehicle transfer - registration (29. 01. 2018)
- Amendment to the act on special health-care services (31. 12. 2017)
- Labor code amendment (18. 12. 2017)
- Amendment of the employment act (14. 12. 2017)
- Amendment of the Labor Inspection Act (08. 12. 2017)
- Amendment to the Building Act and Societies for the Protection of Nature and the Landscape (25. 08. 2017)
- Timely Preparation for the New Version of Personal Data Protection Regulation (30. 06. 2017)
- Prior Medical Instructions in Medical Law (13. 06. 2017)
- Copyright Act Amended (13. 04. 2017)
- The Insolvency Act Extensively Amended (07. 04. 2017)
- The Act on the Origin of Assets (30. 03. 2017)
- A New Legal Framework for the Protection of Personal Data (14. 11. 2016)
- The 2017 Minimum Wage (10. 11. 2016)
- CORPORATE CRIMINAL LIABILITY ACT AMENDED (14. 10. 2016)
- „RECAST“ OF THE LABOR CODE (05. 09. 2016)
- THE CZECH BAR ASSOCIATION CHARGED WITH ALTERNATIVE DISPUTE RESOLUTION (ADR) (05. 02. 2016)
- Consumer Protection Act Amended (25. 01. 2016)
- Travel Claims (01. 12. 2015)
- Entries to public registries recordable directly by notaries (03. 09. 2015)
- Code of Civil Procedure and Enforcement Rules Amended: more protection of the unencumbered spouse (02. 08. 2015)
- Notification of tax-exempt income - a new duty when filing individual income tax return (01. 06. 2015)
- Amendment to the Public Procurement Act (15. 05. 2015)
- HEALTH SERVICES AND HEALTHCARE IN THE LIGHT OF THE PRIVATE LAW RECAST – TWO-TRACK LEGISLATION (11. 03. 2015)
- Contract of Inheritance among Novelties in the Law of Succession (21. 01. 2015)
- Mandatory Electronic Communication with the Tax Administrator (19. 01. 2015)
- Topical Issue: Energy Performance of Buildings Certificate (03. 12. 2014)
- POSSIBILITY TO REGISTER MACHINES IN THE LAND REGISTRY, SO-CALLED RESERVATION FOR MACHINES (30. 05. 2014)
- NEW DUTY TO PUBLISH DATA ON THE INTERNET (28. 04. 2014)
- Beware of pre-contractual liability (31. 03. 2014)
- ARTICLES OF ASSOCIATION OF COMPANIES UNDER THE ACT ON CORPORATIONS (20. 02. 2014)
- CONTRACT ON PERFORMANCE OF DIRECTORSHIP AND CONCURRENCE OF OFFICES AFTER CIVIL CODE RECAST (19. 02. 2014)
- Private Law Recast and the Labor Code (11. 02. 2014)
- Compensation of Wage or Salary during Sick Leave as of January 1, 2014 (28. 11. 2013)
- Legislation Accompanying the New Civil Code (29. 10. 2013)
- New Civil Code (02. 09. 2013)