According to the Explanatory Memorandum, the amendment to Act No. 245/2022 Coll., on the registration of beneficial owners ↗ (hereinafter referred to as "ZESM"), effective from 1 October 2022, responds directly to the reproach proceedings conducted by the European Commission against the Czech Republic.
The European Commission had a primary problem with the very definition of beneficial owner in the ZESM.
A significant difference in the concept of beneficial owner was that the Czech legislator quite formalistically split the beneficial owner into several persons and required that all of them be registered as beneficial owners. The beneficial owner has thus far been divided into:
All of the aforementioned were then entered into the register, which (in an effort to make the environment of business corporations and other legal arrangements more transparent) is often confusing even for experts, let alone the public.
The European Commission was then specifically concerned about the division between "Person with ultimate influence" and "Ultimate Beneficiary". This division was therefore removed by the amendment to the ZESM.
The ZESM used the concepts of "ultimate influence" and "ultimate beneficiary" as two separate facts, whereas the relevant AML Directive loosely conflates the concepts of ownership and control and views both aspects only as defining characteristics of a beneficial owner.
The amendment also puts an end (hopefully at least for the moment) to the legal controversy as to whether it is legally necessary (and even possible) to distinguish between who ultimately "owns" and who "controls" when the legislator clearly states in the Explanatory Memorandum: "Although it is not explicitly stated in the legislation or in the AML Directive, one can speak of a kind of unstated legal presumption that whoever owns is deemed to control and, conversely, whoever controls is deemed to own. "
The amendment to the ZESM therefore gives credence to the voices that have called for this unifying definition from the beginning.
The amendment defines a beneficial owner as "any natural person who ultimately owns or controls a legal person or legal arrangement".
After the amendment, the beneficial owner is the one who:
The concept of decisive influence is new. Until now, the share of voting rights was used, where a share of more than 25% was an indicator of "Persons with Ultimate Influence" as well as fulfilling the definition of "controlling person" under the Commercial Corporations Act.
According to the new legislation, decisive influence is exercised by those who, on the basis of their own discretion, can directly or indirectly achieve that the decision of the highest body of the corporation corresponds to its will. In a commercial corporation, decisive influence is exercised by the controlling person (according to the terminology of the Commercial Corporations Act). This therefore remains the same.
The amendment also contains a rebuttable presumption that decisive influence in a corporation is exercised by the person who can appoint or remove a majority of the members of the corporation's statutory body (This therefore remains the same).
It follows that the new definition of beneficial owner is stricter, as achieving a shareholding in excess of 25% is no longer a mere rebuttable indicator, but will lead to an obligation to identify such a person as a beneficial owner at all times.
Here, the Czech legislator again followed the formal definition of the beneficial owner over the material one.
The rule that persons in the top management of a corporation may be registered as beneficial owners if:
This therefore remains the same.
The registration of such persons should continue to be a last resort, as the registrant must make "all efforts that may be required of the registrant" in an effort to ascertain the beneficial owner and record his or her actions.
We advise everyone to check that your entry matches the new definition. If you are unsure, please do not hesitate to contact us ↗.
Entities that already have a beneficial owner registered have 6 months to make corrections, i.e. until 1 April 2023.
Those who have not yet registered the beneficial owner must do so without undue delay.
The amendment to the ZESM does not introduce new sanctions.
So we repeat here that incorrect registration is punishable mainly by financial penalties.
However, there is also a risk of private law sanctions, such as the application of a ban on the payment of a share of profits, other own resources or the liquidation balance, or a ban on the exercise of voting rights (voting rights sequestration).
It is evident that private sanctions in particular can have far-reaching consequences. It is therefore worthwhile to monitor changes in the records and, where appropriate, to consult with experts.