Only until 1 January 2019 can the business corporations registered in the Companies Register make an entry about their beneficial owner in the Beneficial Ownership Register, without any potential sanction impending. If these are business corporations established before 1 January 2018, making the entry about their beneficial owners will be exempted from the court fee of CZK 1,000.

Other entities, which are not registered in the Companies Register (such as for example institutes, clubs, trust funds), must make an entry registering their beneficial owner by 1 January 2021. Exemption from the court fee relates to these entities as well (if established before 1 January 2018). Although they thus have a deadline longer by two years to make an entry, fee exemption only applies to entries performed by 1 January 2019, which is intended to motivate these entities to make an entry as soon as possible.

The necessity of making an entry about beneficial owners stems from the so-called AML Directive of the European Union (its full name being the Directive on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing), which has introduced the obligation to create this register of beneficial owners for the purposes of revealing ownership chains and preventing concealment of owners' identity behind corporate structures.

From the local act on some precautions against legalisation of proceeds from criminal activity and financing of terrorism, a duty ensues for selected entities (such as lawyers, tax consultants, auditors, financial and credit institutions) to identify the beneficial owner of their business partner. The newly created beneficial ownership register makes compliance with this duty considerably easier for them, because these entities are among the few, who are entitled by law to inspect this register. In addition to them, the tax administrator also has access to the register and can draw on information from it for the purposes of tax administration.

The enactment relating to the new type of register was implemented in the act on some precautions against legalisation of proceeds from criminal activity and financing of terrorism (specification of the beneficial owner) and the public registers act (arrangement of the register, forms of entry, inspection of the register etc.) in the Czech Republic.

The beneficial owner is always understood to mean a natural person, therefore in cases, where chaining of ownership structure occurs, using legal entities, the natural person or persons standing at the end of such chain must always be identified. These persons must have, de facto or de jure, the option to exercise directly or indirectly decisive influence in a legal entity or trust fund (material condition). The “option to exercise decisive influence” will mostly derive from the stake the natural person will have at its disposal. The law stipulates a rebuttable presumption that the beneficial owner is a natural person disposing of a 25 % stake in registered capital or share of profit, at minimum, but if this person does not also have “the option of decisive influence”, it will not be a beneficial owner. In case, when the beneficial owner cannot be determined based on the material condition or the rebuttable presumption, legal fiction is applied, and for example a member of the statutory authority is considered to be a beneficial owner.

The above-mentioned condition must also be fulfilled in case of entities without legal subjectivity, such as for example foundations and trust funds. The rebuttable presumption only adds that the founder, trustee, beneficiary, or persons authorised for supervision etc. can be considered a beneficial owner.

The beneficial ownership register is kept in electronic form, but a proposal for an entry can be submitted to the court maintaining the register both in electronic form (with an electronically acknowledged signature or by means of a data box of a legal entity or trust fund), and in paper form with an authenticated signature of the person acting on behalf of a legal entity or trust fund. Substantiation of evidence is required to accompany the proposal for an entry, proving the grounds, based on which the entered natural person is considered a beneficial owner. A notary may also make the entry to register the beneficial owner based on a request of a legal entity or trust fund.

If you have not registered the beneficial owner of your company in the register yet, or you are among the entities, to which the deadline of 1 January 2021 applies, do not hesitate to contact us and we will be happy to assist you with it.