We would like to draw your attention to the corporate obligations related to the end of the financial period. These include the following:

The annual financial statements must be considered and approved by the General Meeting of the shareholders of the company no later than 6 months from the end of the financial period. Hence, if the financial period ended on 31 December 2023, the financial statements must be approved by 30 June 2024.

Furthermore, along with the financial statements, a proposal on the use of profit and loss shall also be presented to the General Meeting for approval. The statutory body decides on the actual payment of the dividends and other own resources. This decision is subject to the so-called balance and insolvency tests to assess whether the profit can be paid out. These documents, incl. the financial statements, or the annual report if prepared by the company, should be filed with the Collection of Deeds no later than 12 months from the balance sheet date.

We would like to point out that the most recent amendment to the Act on Public Registers sets out that if a company does not file the annual or extraordinary financial statements with the Collection of Deeds for at least two consecutive financial periods and at the same time the company cannot be contacted by the Registry Court, a disciplinary fine or even the dissolution of the company without liquidation may be imposed.

Finally, in connection with the approval of the financial statements by the General Meeting and the decision on the use of the P&L, we recommend that the company has a beneficial owner registered in the Register of beneficial owners or that the entry in the Register corresponds to the actual facts. Otherwise, according to the Act on the Registration of Beneficial Owners, the shareholders might not be able to exercise their voting rights at the General Meeting and a share of their profit might not be paid out.

We are ready to assist you with the required documents and meet the legal obligations.

We would like to remind you the annual legal obligation to prepare a Report on Relations in the Czech Republic under the Business Corporations Act (the BCA). The obligation to prepare the report is set by law for all companies (controlled entities) that are controlled by another entity or form a part of a group of companies.

The Report on Relations (inter alia):

Deadline for the Report on Relations in the Czech Republic

The Report on Relations shall be prepared by the statutory body of the controlled entity no later than three months after the end of the accounting (financial) period, and shall be reviewed by the company supervisory body (if appointed). The statutory body shall file the Report on Relations with the Collection of Deeds kept by the applicable Registry Court within the period for filing the Financial Statements compiled for the financial period covered by the Report on Relations. If the Financial Statements of the business corporation are audited, the Report on Relations shall be part of the Annual Report.

If your company’s financial year ended on 31 December 2023, the Report on Relations shall be prepared by 31 March 2024.

Penalties for non-compliance

If the obligation to prepare and file the Report on Relations is breached, the company may face a disciplinary fine of up to CZK 100,000.

If you are interested in our advisory services in the Czech Republic, we will gladly prepare the Report on Relations for you so that it complies with all requirements set out by law, and file it with the Collection of Deeds of the applicable Registry Court.

The data boxes in the Czech Republic represent a secure and state-guaranteed electronic communication portal, which can be used to communicate with authorities, courts or other entities, including private entities. For now, all public authorities, legal entities registered in the Commercial Register, and representatives of the so-called liberal professions such as attorneys, insolvency administrators, auditors or tax advisors are obliged to have the data box. However, there will be a change from 1 January 2023. Newly, the data boxes in the Czech Republic will also be automatically set up for all entrepreneurs and the rest of legal entities that have not yet been obliged to have the data box established.

Download article as PDF

Who will be the new holder of data boxes in the Czech Republic?

Most of the new holders of data boxes will be the entrepreneurs, i. e. freelancers or self-employed persons, even if they have their business activity suspended. If these persons already have the data box based on their position as the natural persons, according to the new obligation they must have one more data box established based on their position as the entrepreneurs.

The data boxes will also be newly set up to all non-profit organisations, i.e. in particular foundations, charitable associations, communities of unit owners, trust funds, associations or various societies.The original version of the amendment to the act also provided for the automatic establishment of data boxes for natural persons who use the citizen’s electronic identity (a resource in the NIA national point system). However, this rule was abandoned as it was perceived as too strict. Thus, in general, for the individuals who are not entrepreneurs, the data box will only be set up upon their request.

How do I find out that my data box has been established and how do I log in?

The data boxes in the Czech Republic will be set up between January and March 2023.

The entities will obtain their access details by a registered letter once the data boxes are automatically set up. However, they need to beware that the data boxes will be activated even if the letter with the access data is not picked up and the entity never logs in to the data box.

If you already have the data box as an individual, the access details for the new data box will be sent here instead of receiving the letter. In this case, unfortunately, the data boxes cannot be merged into one, as you will act as a different type of entity with each of them, as a natural person and as an entrepreneur.

As far as the activation of the data box itself is concerned, the data box will be activated either by logging in itself or automatically after 15 days from the date of its establishment, if such a login does not occur

Beware of deemed delivery

Received data messages are stored for 90 days after logging in. After that, they are deleted. If the person does not log in to the data box, the data message will be stored for a maximum of 3 years

However, what is essential and what needs to be paid attention to in order to avoid adverse consequences, is the change in delivery and the deemed delivery associated with it. The data message, both in the context of private communications and communications with public authorities, is considered to have been delivered at the moment when it is logged into the data box. However, if no such log in occurs, the data message is considered to have been deemed delivered on the 10th day after its delivery.

Please note a recent development following the decision of the Supreme Administrative Court relating to this matter: If 10th day falls on a weekend or public holiday, it will not be deemed delivered automatically, but the deemed delivery will take place on the next working day. This rule is valid as of 1 January 2023.

We therefore recommend setting up a notification system for newly incoming data messages in order to avoid the risk of delay.

Over time, data boxes in the Czech Republic should become a completely common and trusted communication portal between individual entrepreneurs and organisations/authorities. With their lower financial cost and greater convenience, they could even completely replace registered letters.

If you are interested, we can offer you the service of managing data boxes in the Czech Republic with our own access data. We will always inform you about the received data messages in a timely manner and we will also ensure their secure archiving.

On 1 October 2022, the amendment to the Act on the Register of the Beneficial Owners came into force. This amendment brings new rules for the beneficial owners in the Czech Republic and responds to the requirements of the European Commission, according to which the current local regulations on the beneficial owners are not in compliance with the European law. The amendment will further reduce the administrative burden on the registrants’ end and ensure greater transparency of organisations.

Download article as PDF

What is changing with the new legislation?

Definition of the beneficial owner

The main change brought by the amendment is a simplification of the definition of the beneficial owner. The amendment departs from the distinction between the ultimate beneficiary and the person with ultimate effective control, and it establishes a uniform material definition of the beneficial owner.Newly, only the direct or indirect ownership or control in a legal person or legal arrangement will establish a basis for identifying the beneficial owner. The ownership will be based on the factual situation and the ownership of 25% share (of participation in the capital, voting rights or profit) will be the determining criteria. At the same time, it will not be necessary to meet the material condition of possessing the ultimate control. This may result in the identification of multiple beneficial owners – significant ‘players’ in the company who may not have actual decisive influence.

Additional entities obliged to register the beneficial owner

The obligation to register the beneficial owner will now apply to some legal entities and legal arrangements that did not have this obligation before. The registration of the beneficial owner will be required for:

Extension of the period during which the voting rights are not suspended

The new amendment also extends the period during which the voting rights of an unregistered beneficial owner are not suspended, and that is from 15 to 30 days. If the position of the beneficial owner is established in the period of 30 days prior to the date of the general meeting, the prohibition on exercising voting rights will not be applied.

Automatic data exchange and change of beneficial owners’ data according to the new amendment

In order to comply with the terminology of the new amendment, most of the data already entered in the register of beneficial owners will be adjusted automatically, without the need to submit a new registration form for changes of the beneficial owners’ data.

For most of the entities which will have a new obligation to register their beneficial owner, the automatic data exchange mechanism will also be used.

The automatic data exchange will take place during the month following the entry into force of the amendment, i.e. during October. If the automatic data exchange does not occur, the registration will have to be amended within 6 months, i.e. by the end of March 2023.

Likewise, legal entities that have fulfilled the registration obligation under the previous legislation but will not have the automatic data exchange applied, will have 6 months from the entry into force of the amendment to proceed with the registration updates in order to comply with the new requirements.

Our recommendations

We will be happy to assist you with the registration of the beneficial owners in the Register. Please do not hesitate to contact us.The new Act on the Registration of Beneficial Owners will come into force on 1 June 2021 and it will completely replace the current concept of the ultimate beneficial owner existing under the Act on Public Registers. The new rules for the beneficial owners in the Czech Republic will bring numerous changes and, above all, introduce significant sanctions for a breach of the obligation to register the ultimate beneficial owner.

What is changing with the new legislation?

Broader definition of ultimate beneficial owner

Until now, the ultimate beneficial owner was defined as a natural person who is able to exercise decisive influence in a legal entity – either directly or indirectly. The legal title under which the ultimate beneficial owner exercised his/her decisive influence was not essential since it was sufficient for him/her to have a factual power to exercise such control.

Although the new concept of the ultimate beneficial owner is still tied to the factual situation, it shall be noted that the new definition of ultimate beneficial owner recognizes not only a person who has the ultimate control, but also a person who is the ultimate beneficiary (of a share in the benefit).It is to be emphasized that the ultimate beneficial owner is any natural person who meets the above criteria. Thus, more than one ultimate beneficial owner may exist in relation to the legal entity according to the new rules for the beneficial owners in the Czech Republic.

Person with ultimate control

A person exercising the ultimate control is a natural person who can, directly or indirectly, exercise decisive influence in the legal entity without passing it on to another person.

Ultimate beneficiary

An ultimate beneficiary is a natural person who may acquire, directly or indirectly through another entity, a substantial part of a share in the benefit generated by the activity or liquidation of the legal entity or generated by the administration or dissolution of a legal arrangement (hereinafter the “benefit”), and does not pass on this benefit.

What to do if the ultimate beneficial owner cannot be determined?

If the ultimate beneficial owner cannot be identified, any person in the top management of the entity on top of the ownership structure is to be registered. However, if such person in the top management is to be registered as the ultimate beneficial owner, it is necessary to record all steps taken while identifying the ultimate beneficial owner. Until now, the members of the statutory body of a Czech entity have been registered as the ultimate beneficial owners in such situations.

What is to be registered?

In the Register of Ultimate Beneficial Owners, the following information relating to the ultimate beneficial owner (who is always a natural person) will be registered:

Who will have access to the registered information?

A part of the registered information relating to the ultimate beneficial owners will be now accessible to public. The Ministry of Justice will allow anyone to obtain partial excerpts from its website.

What sanctions can be imposed?

If the Registrant (the Czech company) does not register the ultimate beneficial owners in the Register of Ultimate Beneficial Owners or it enters information that does not conform to the real situation, the following sanctions may be imposed:

When a discrepancy is found, the Reporting person within the meaning of the AML Act (eg. notaries, banks, lawyers) shall invite the Registrant to explain or eliminate the discrepancies. If the Registrant does not explain or eliminate the discrepancy, the Reporting person may not carry out the transaction in question and must report the discrepancy to the applicable court.

In practice, the discrepancy or absence of the registration in the Register of Ultimate Beneficial Owners may result in the following situations:

Deadlines for registration

The new rules for the beneficial owners in the Czech Republic will come into force on 1 June 2021:

Our recommendations

downloadcross