As we have said in some later issues of our newsletter, after the passing of the new Civil Code (with respect to provisions § 120 and § 121 which provide for changes in public registers in general), Act No. 304/2013 Coll, on the public registers of regal entities and natural persons (“act on public registers”) was adopted. The main aim is to unite a large number of registers into one; namely association registry, foundation registry, registry of institutes, associations of owners of units registry, commercial registry and registry of generally beneficial societies. It is still the regional courts that are appointed to administer these registers.

An amendment on public registers is currently being drafted in the Chamber of Deputies and should come into force together with the changes based on the AML Directive (Directive (EU) 2015/849 of the European Parliament and of the Council on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing). The amendment is to be discussed in the Chamber during September. According to this amendment a new obligation arises to enter information about the beneficial owner of corporate bodies and trust funds. To make things a little bit more difficult, the beneficial owner is defined in a new amendment to the Act No. 253/2008 Coll, on selected measures against legitimisation of proceeds of crime and financing of terrorism. For the purposes of this Act, the beneficial owner is defined as a natural person who is effectively or legally able to have direct or indirect influence on the corporate body, trust fund or other legal arrangement lacking legal personality. The Act directly states that in case there is no other way to determine the beneficial owner of a business corporation, one of the members of its statutory body assumes that position. According to the makers of this Act, this situation should serve only as the last resort. Question is how this will play out in practice and whether this option won’t be used “too often”. In foundations, associations, foundation funds, trust funds etc. a natural person or a beneficial owner of a corporate body, which assumes the position of a settlor, trustee, beneficiary or other persons, can be regarded as the beneficial owner.

The proposal for entry of information about its beneficial owner will, in most cases, have to be done by the person whose data is being entered, i.e. corporate body, trust fund etc. This person has a responsibility to record and regularly update current information which provide for the ascertainment and verification of the beneficial owner’s identity, including information that provides basis for the beneficial owner’s position or any other substantiation disclosing why this person is considered the beneficial owner. The person should also hold responsibility for the information about its beneficial owner being entered into the registry. The Act brings no obligations to the beneficial owner. The proposal for entry of information about the beneficial owner must be made without any delay after the operative event. This event is not specified any further in the Act and even with regard to transitional provisions it does not state the period in which the changes about the current beneficial owner should be published.

The register of beneficial owners will not be a public one, although to reduce administrative expenses it should be established and administered in the currently used platform. Information about beneficial owners should be available only to selected subjects, among these for example:

1. courts, for the purposes judicial proceedings,
2. law enforcement authorities, for the purposes of criminal proceedings,
3. tax authorities,
4. Financial analysis unit,
5. Czech National Bank,

and others.

The following information about the beneficial owner will be entered:

• name, address of residence, permanent address if it is different from the address of residence,
• date of birth and birth number, if the owner has been assigned one,
• nationality,
• information about:
  • proportion of the voting rights (if he or she is considered the beneficial owner based on their direct involvement in the firm),
  • interest in distribution of resources (if he or she is considered the beneficial owner based on the income),
  • other factors (if he or she is considered the beneficial owner because of other reasons).

Together with the proposal for entry of information about the beneficial owner other documents providing supporting evidence should be submitted. However, the amendment doesn’t state exactly what documents should these be, which leads us to believe that we may expect many problems in this area.

The amendment on public registers also establishes the period during which the information must be entered in the register.  There is, for example, a five working days period which starts on the day of delivery of proposal for entry of information about the beneficial owner and during which the court maintaining the register must enter this information in the relevant register. Individual entries can be carried out by courts maintaining the register and by notaries also. Notaries should enter the information into the register after receiving the proposal without delay.

This amendment of the act on public registers should, based on current plans, come into force on the 1st January 2018.

Should you have any questions concerning this topic do not hesitate to contact us.