Amendment to the Act on Registration of Beneficial Owners

Act No. 37/2021 Coll., on the Beneficial Owners Register (hereinafter referred to as the “BOR Act”) will be amended even after a year of its effectiveness. Due to the ongoing proceedings conducted by the European Commission against the Czech Republic on failure to fulfil obligations for correct implementation of the so-called V. AML Directive, the Government is taking the necessary steps. Namely the Commission made the possibility of drawing funds according to the National Recovery Plan conditional on amendment of this law.

In particular, the change in the definition of beneficial owner is essential. There will be no distinction between the terms of “person with ultimate influence” and “ultimate beneficiary”. A distinction will be made whether the beneficial owner is direct or indirect and whether the beneficial owner is material, surrogate (pursuant to Section 5 of the BOR Act) or formal. The beneficial owner will be uniformly considered to be the person who owns or controls (or can control) the legal entity or legal arrangement.

“According to the proposal, the beneficial owner of a corporation is to be any natural person who owns or controls a corporation by:

• a direct interest or share or voting rights, including bearer shares, exceeding 25%,
• a right, direct or indirect, to a share of more than 25% in profits, in other own resources or in proceeds of liquidation,
• a control over a corporation or corporations which, separately or collectively, have an interest or share, including bearer shares, in that corporation exceeding 25%; or
• a control over the corporation by other means; the control shall include, inter alia, the criteria laid down in Article 22 (1) to (5) of Directive 2013/34/EU of the European Parliament and of the Council.”

Churches, trade unions, employers’ organisations, associations of residential unit owners and hunting associations, etc., will most likely also be subject to the obligation to register in the BOR.

An extension from 15 to 30 days of the period within which, pursuant to Section 54(1) of the BOR Act, voting rights are not temporarily suspended is welcome (if the status of a beneficial owner arose in a period of up to 30 days before the General Meeting, the prohibition on the exercise of voting rights shall not apply to them).

Corporations with a complicated ownership and management structure will probably have to undergo registration again, but corporations that have already fulfilled the obligation will be exempted from the application fee under the amended regulation.