As published on step.org/industry-news, Monday 10 October, 2022.
The government of the Czech Republic has amended its Act on the Registration of Beneficial Owners (Act No. 245/2022) 18 months after its enactment, following the European Commission's decision that the original version of the law does not fulfil the country's obligations under the EU Fifth Anti-Money Laundering Directive (5AMLD).
5AMLD requires every EU Member State to collect information on all persons who exercise ultimate control over a company and make it available in a public register. However, the original Czech Republic legislation was incorrectly transposed, listing a relatively broad range of entities that do not have a beneficial owner. It only took into account persons with the largest share in the company, usually those holding more than a 40 per cent share, when determining the ultimate beneficial owners (UBOs) based on the ultimate control factor.
The new amendment corrects this. As of 1 October 2022, all shareholders with at least 25 per cent shares, along with their structures, should be considered and registered as UBOs. It also specifies that UBOs include those who are entitled to a share in profit, other equity funds or the liquidation balance of more than 25 per cent; who exercise decisive influence in either the entity or corporations that hold a share of more than 25 per cent in the entity; or who otherwise exercise decisive influence in the corporation.
The register of beneficial owners will show no difference between an ultimate beneficiary and a person with ultimate influence, says law firm Taylor Wessing. It will indicate only whether the nature of a beneficial owner's status is direct or indirect, if they are a substitute beneficial owner and how this is determined. However, there will be no change to the fact that if a beneficial owner cannot be decided on using these definitions or if the corporation is controlled by a legal entity that has no beneficial owner, a Czech Republic corporation can list senior management at the head of its ownership structure as a substitute beneficial owner.
A key change to the legislation occurs where chaining (ownership or control through a series of connected entities or downstream relationships) is taking place. In such cases, shares held by connected entities are to be multiplied with each other.
Companies who are not compliant with the new regime face potential sanctions of up to EUR20,000, notes law firm Schoenherr. Moreover, companies with an unregistered or incorrectly registered UBO are not allowed to distribute profits either to this UBO or to a legal entity with the same UBO.
Every Czech Republic company should inspect its UBO records and, if necessary, update its UBO registration accordingly, said Schoenherr. The deadline for this 1 April 2023. 'Particular caution should be exercised by those companies with multiple shareholders or those who have previously registered as their UBO a person as being the ultimate beneficiary', the firm notes.