Get free access to
Our legislation updates make it easy for you to keep on top of the latest changes affecting your business. Receive our articles, opinions, tips, industry news, country profiles, regional overviews and studies, latest events and even more, directly into your mailbox.
Check out our Newsroom to see what is included!
We will send you only relevant information we consider may be of your interest and treat your personal data in compliance with our Privacy policy and GDPR statement.
Unable to subscribe? Â Try this page.
The concept of the beneficial owner is of considerable importance in the fight against both money laundering and the financing of terrorism. The beneficial owner is also verified, for example, in connection with the provision of public procurements, grants, or licenses.
In general, it can be said that the purpose of identifying the beneficial owner is to strengthen the transparency of legal entities and legal arrangements and to reveal otherwise unclear or hidden structures.
A beneficial owner is every natural person who ultimately owns or controls, directly or indirectly, a legal entity.
The beneficial owner is defined as every natural person who directly or indirectly:
It is thus possible for a legal entity to have more than one beneficial owner, including persons who are important (in terms of having relatively significant participation in the legal entity), but do not have effective control in real terms.
Ultimate control is exercised by a person who:
Example No. 1
Ms. Anna:
Indirect capital shareholding in Beta s.r.o. equals 30%.
Indirect ultimate control over Beta s.r.o. equals 30%.
Mr. Ben:
Indirect capital shareholding in Beta s.r.o. equals 20%.
Indirect ultimate control over Beta s.r.o. equals 0%.
Ms. Catherine:
Indirect capital shareholding in Beta s.r.o. equals 45%.
Indirect ultimate control over Beta s.r.o. equals 50%.
Ms. Anna and Ms. Catherine are the beneficial owners of Beta s.r.o.
The following entities do not have a beneficial owner:
If all possible means of identifying the beneficial owners within the statutory definitions have been exhausted, provided that there are no grounds for suspicion, top management of the ultimate parent company is then registered as a substitute solution.
A person in top management includes any natural person who ensures the day-to-day or strategic management of the corporation’s activities. These persons can be members of the statutory body of the legal entity and/or top managers of the corporation (CEOs).
A substitute beneficial owner can only be considered in relation to corporations.
Example No. 2
The documents evidencing the beneficial owner’s position and the ownership structure are necessary for the registration. These may include the following:
All these supporting documents:
The registration or any updates in the register must be initiated without undue delay (this is usually considered to be within 15 days) in the following situations:
Automatic data exchange is a mechanism for transferring certain information from the Czech public registers into the Register of Beneficial Owners. Natural persons registered in the Commercial Register in specific positions are automatically registered as beneficial owners given that specific legal prerequisites are met.
Example No. 3
Mr. Dan, a natural person, is a new 100% shareholder of Kappa s.r.o. Mr. Dan is listed as the sole shareholder in the Commercial Register. On the basis of the automatic data exchange, he is immediately listed as the beneficial owner of Kappa s.r.o. in the Register of Beneficial Owners as well as in Omega s.r.o. which is 100 % owned by Kappa s.r.o.
The Register of Beneficial Owners is available on the website of the Ministry of Justice.
The Register of Beneficial Owners is partially public. The information that is publicly available includes:
The ownership structure is not publicly available.
Full information about the beneficial owner, including the registration history, can be obtained by the following persons:
The court will publish a note on irregularity in the Register which may have a negative impact on the company by decreasing its credibility.
The private law consequences will occur independently of the irregularity proceedings; they are not tied to the court’s previous finding that there is an irregularity in the records.
These arise if:
Hence, these measures particularly target the unregistered beneficial owners. If the beneficial owner is registered, but some of their details are inaccurately registered or not entirely up to date, the private law consequences do not apply. However, we recommend paying attention to two different scenarios that may occur:
Example No. 4
Ms. Ela is registered in the Register of Beneficial Owners as the beneficial owner of Iota s.r.o., owning a 60% share in the company. Subsequently, Ms. Ela buys another share in Iota s.r.o., i.e. she now holds 80% of shares. If Ms. Ela does not update the information about her new share in the Register of Beneficial Owners, the private law consequences do not arise.
Although the private law measures did not apply in our Example No. 1, we strongly recommend updating any changes concerning the beneficial owner or the ownership structure in the Register of Beneficial Owners.
Example No. 5
Ms. Fay is registered in the Register of Beneficial Owners as the beneficial owner of Sigma s.r.o., owning a 90% share in the company. Mr. Gus owns a 10% share in Sigma s.r.o. Hence, he is not registered as the beneficial owner. Ms. Fay sells 20% of her share to Mr. Gus, so Mr. Gus now owns 30%. Thus, Mr. Gus should be registered in the Register of Beneficial Owners without undue delay. If he fails to do so, the private law consequences may arise.
1. Unenforceability of concealing contracts (e.g. command contracts)
Example No. 6
Mr. Han formally transferred 100% of the shares of Gamma, a.s. to Mr. Ian but, at the same time, contractually obliged him to exercise all the rights of a sole shareholder according to his instructions for regular remuneration. Mr. Ian is formally registered in the public register as the only shareholder, but in reality, the rights of the shareholder are exercised indirectly by Mr. Han. If Mr. Han is not registered in the Register of Beneficial Owners, the contract between him and Mr. Ian is unenforceable.
2. Suspended distribution of dividends
The company that does not have a beneficial owner registered in the Register of Beneficial Owners is prohibited from paying out the dividends in the following situations:
Example No. 7
3. Inability of shareholders to exercise their voting rights
Suspension of voting rights at the general meeting (inability to make decisions on the most important matters of the company, e.g. change of the Deed of Incorporation in a form of the Notarial Deed, approval of the financial statements, change of directors etc.).
Who may have the voting rights suspended?
Example No. 8 (please, refer to the diagram in Example No. 7)
What are the consequences if the voting rights are nevertheless exercised and decisions are adopted?
Such decisions are deemed invalid. The invalidity of these legal actions can be claimed within a subjective period of 3 months and an objective period of 1 year.
There are other consequences the companies may face in the course of their business should they fail to proceed with the registration of beneficial owners (the list is not comprehensive):
Which legal entities are obliged to register their beneficial owners?
The obligation to register the beneficial owners is imposed on legal entities who have their registered office in the Czech Republic. This includes all types of corporations (unlimited partnerships, limited partnerships, limited liability companies, joint stock companies, European companies) and some cooperatives. Foundations, endowed institutions, and public benefit corporations must also register their beneficial owners.
The trusts are also obliged to register beneficial owners. However, trusts do not have a status of the legal entity, and therefore, the registration obligations fall on a trustee. If the trusts have the trustee with its registered office or residence in the Czech Republic (which can be found in the public part of the Trust Fund Register), it should have, as a rule, its beneficial owner entered in the Register of Beneficial Owners.
Legal entities which are not obliged to register a beneficial owner are listed in the section “Who is a beneficial owner?”.
Does a branch of a foreign company have to submit the data of the beneficial owner?
No, it does not. A branch is not a legal arrangement within the meaning of the Act on Registration of the Beneficial Owners.
Who is the beneficial owner in the case in which a parent company is a company listed on a regulated market?
The companies listed on a regulated market are not exempt from the registration obligation. We either look for the beneficial owner (natural person) with ultimate ownership or control, or apply the alternative solution of registering the substitute beneficial owner.
What if the parent company / beneficial owner does not provide necessary cooperation?
If the parent company is from outside the EU, it is necessary for the registrant to explain the importance of the supporting documentation and, additionally, document that they have made reasonable efforts to obtain such information from the parent company / beneficial owner. If the parent company / beneficial owner does not provide the necessary cooperation, the registrant shall register top management of the parent company or top management of a company, which is one level under the parent company.
It should be noted that failure to provide the necessary cooperation, on the part of the beneficial owner / parent company / other companies within the corporate chain, can result in the court initiating the irregularity proceedings (for the reason of the irregularity on the part of the person obliged to cooperate), which in turn may affect other sanctioning mechanisms.
Will I receive any decision on the registration?
There is no decision on the registration. If the registration is successful, the registrant shall receive a full extract of the registering entity from the Register of Beneficial Owners (including non-public information) It is provided either by a notary or the court.
Sign up and get free access to our expert knowledge and valuable insights. You can unsubscribe from our mailing list anytime. Check also how we handle your data: Privacy policy | GDPR statement.
Already subscribed? Confirm your e-mail address below and receive your PDF directly in your inbox.