If you are setting up an LLC or a joint stock company, you must not forget the obligation to register in the register of beneficial owners. This often happens automatically, but it doesn’t have to and irregularities in registration can lead to heavy fines. In this article, we look at how the register of beneficial owners works, who must register and the penalties if you fail to do so.
The Register of Beneficial Owners (sometimes also a register, register or list) is an information system that collects data on the beneficial owners of legal persons and trusts. It is regulated in detail by the Law on the Registration of Beneficial Owners and is administered by the Ministry of Justice.
The Register of Beneficial Owners was created following the need to introduce new legislation against money laundering and terrorist financing(AML Law), and its main objective is to increase transparency of ownership structures of legal entities.
We have discussedthe AML law in detail in another article. Read on to find out what your obligations are under it.
The Beneficial Owners Registration Act sets out the rules and obligations regarding the keeping of records of natural persons who have effective control over legal persons and trusts. It regulates the conditions under which beneficial owners are to be registered, the manner in which the records are to be kept, access to such data and the protection of the privacy of registered persons.
The law also specifies who is obliged to enter data in the register, what information is recorded and sets out responsibility for its accuracy. It also regulates the possibilities of access to the data in the register and sets out possible sanctions for breach of the obligations set out.
In the following chapters we will look at the individual rules in detail:
First, let’s answer the question – who is the beneficial owner? The Beneficial Owners Act defines a beneficial owner as an individual who owns or has effective control over a legal entity or trust.
This is often quite clear (e.g. when a company has only one owner). In many cases, however, multiple owners are involved in ownership and decision-making.
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In the case of a corporation, the beneficial owner is the person who:
Decisive influence in this case is understood as the ability to impose one’s will in the decision-making of the highest body of the business corporation. Decisive influence is also exercised by the person who can appoint or remove a majority of the members of the statutory body of the business corporation. It does not matter whether the influence is exercised directly or through an intermediary.
If, on the basis of this information, the beneficial owner cannot be determined, then all persons in the top management of the business corporation shall be deemed to be the beneficial owner.
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In the case of other types of corporations that are not business corporations (e.g., various associations, unit owners’ associations, trade unions, churches, etc.) and housing and social cooperatives, all persons who are members of the statutory body are deemed to be the beneficial owner.
In the case of an institute, charitable company, trust or legal arrangement, the beneficial owner is the person who has decisive influence within the organisation. That is, one who can influence the decision-making of the governing body.
The beneficial owner is also always those persons who are:
It is also determined whether there is a direct or indirect beneficial owner. A direct beneficial owner is a person who directly owns an interest in the company which gives him or her control. An indirect beneficial owner is a person who owns a share indirectly, i.e. through another legal person or legal arrangement.
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All of the following must be entered in the Register of Beneficial Owners:
Some organisations do not have a beneficial owner and are therefore not entered in the register of beneficial owners. This includes various state organisations such as educational establishments, public research institutions, state-owned enterprises, etc.
The following information is entered in the register of beneficial owners:
If it is a company with a simple organisational structure and a clearly defined beneficial owner, then there will most likely be an automatic transcription from other registers (e.g. the commercial register). In this case, you do not need to do anything but check the entry in the register of beneficial owners.
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However, if the company has a more complex organisational structure and management, then you will have to deal with the registration yourself, without undue delay after the occurrence of a decisive fact (e.g. after the company is established or the beneficial owner changes). The registration of the beneficial owner can be arranged through the court or a notary.
The application for registration in the register of beneficial owners must be submitted electronically. On the website of the Ministry of Justice you can find the application form, which you fill in, download in pdf format and send via data box or by e-mail with electronic signature to the address of the competent court (regional court). The form must also be accompanied by evidence of the beneficial owner. This may be, for example, an extract from the commercial register, a list of shareholders or the instrument of incorporation.
An exception in this case is made for non-business corporations (e.g. SVJ or cooperative) and legal arrangements, which may submit the application in documentary form with a certified signature.
You will pay a court fee for a petition for registration in the Register of Beneficial Owners, the amount of which depends on the type of legal entity involved:
In most cases, registration by the court is unnecessarily complicated and expensive, and therefore registration by a notary public is preferable. In specific cases, however, registration by the court is necessary. Such a situation may be that you want to make the recorded information about the beneficial owners inaccessible. This can be requested if the beneficial owner is not fully competent (e.g. because the beneficial owner is a minor).
As we have already announced, it is probably more worthwhile to have the registration carried out by a notary. You can choose any notary to whom you submit your application for registration. The notary will then issue a certificate for the registration, which will then be carried out remotely (no need to fill in a proposal form beforehand).
The notary has 3 days to carry out the registration. The price consists of the notarial tariff for registration, which is uniformly set at CZK 300, and the fee for the certificate for registration, which varies depending on the type of organisation:
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Inconsistencies may occur in the beneficial owner register due to the entry of incorrect or incomplete information about the beneficial owner. An irregularity may be detected, for example, by a court, public authorities, a notary or another authorised person.
If such a discrepancy is discovered, the court will invite the registrant to rectify or explain the discrepancy within a specified period of time. The registrant must rectify the discrepancy by filing a petition for registration with the court or an application to a notary public according to the rules discussed in the previous chapter.
If the recording person does not resolve the discrepancy, the court may initiate proceedings for the discrepancy. Proceedings are mainly initiated in situations where there is a possibility that the irregularity could harm the rights of third parties (for example, business partners) or where it is contrary to the public interest.
The court investigates the circumstances and examines the evidence in order to confirm or refute the irregularity in question. If there are concurrent proceedings for the registration of the correct data (e.g. before a court or notary), the court will usually stay the irregularity proceedings.
At the end of the proceedings, the court declares which entries in the register do not correspond to the actual situation and, if possible, determines what the actual situation is. It then either deletes the incorrect data or replaces them with the correct ones. The court’s decision is declaratory in nature, which means that it merely confirms that an irregularity exists but does not impose any new obligations on the registrant – these arise directly from the law. The decision can be appealed.
If the court finds that the irregularity is due to a failure by the beneficial owner or other relevant person (e.g. a person with ultimate influence) to cooperate, it states this reason in its decision. This finding may then be grounds for imposing a fine for the offence.
Learn how the administrative procedure works and what to do if the administrative authority fails to fulfil its role.
The register of beneficial owners is available free of charge online. However, you will not find a full list of information here. You can only get a full listing of the organisation if you are the registrant or registered as the beneficial owner. For other organisations you will only get a partial listing.
The partial listing provides information on the file mark, the name of the organization, the identification number, and basic information about the beneficial owner, such as name, date of birth, nationality, residence address, the nature of the beneficial owner status, information about the facts giving rise to the beneficial owner status, and the date on which the individual is the beneficial owner. A graphical view of the relationship structure is also included.
In the case of beneficial ownership registration, you may be guilty of several offences and related penalties. These offences can arise both on the registrant’s side and on the beneficial owner’s side.
Penalties of up to CZK 500,000 can be imposed if you:
The statute of limitations for the offence of failure to ensure the correction of incorrect data shall be 1 year. The registering person shall not be liable for the offence if 2 years have elapsed between the occurrence of the irregularity and the initiation of the proceedings by the court or if the beneficial owner or intermediary has failed to provide cooperation and the infringement has been confirmed by the court.
Offences are dealt with by the municipal authority of the municipality with extended jurisdiction according to the seat or residence of the suspected offender. If the suspect has his/her domicile or residence outside the Czech Republic, the competent municipal authority shall be the municipal authority of the place of the court which has ruled on the obligation related to registration.
The Register of Beneficial Owners, administered by the Ministry of Justice of the Czech Republic, is used to record natural persons with de facto control over legal persons or trusts. It was introduced on the basis of the AML Law in order to increase the transparency of ownership structures.
A beneficial owner is a person with more than 25% of the company’sshares , voting rights or profits, or who has decisive influence. If this cannot be determined, persons in the top management are considered to be the owner.
Registration can be automatic from public registers or on application to a court or notary, with fees depending on the type of entity. The registration includes identification data, shares and the structure of the relationships. Access to the data is free of charge, but only the registrants or beneficial owners can obtain a full extract.
Irregularities must be rectified on the court’s request or face fines of up to CZK 500,000. Record-keeping is crucial for transparency and protection of the rights of the persons involved, as well as for the prevention of legal and financial problems.
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Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.
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