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Czech Public Register to Draw in UBOs

Czech Public Register to Draw in UBOs

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The Czech Commercial Register collects and records information on a broad range of incorporated entities in the Czech Republic, including the most common forms of companies that carry on businesses. Much of this information is publicly available via a free to use website.

At present, the public can use the Commercial Register to identify the direct shareholders of a Czech limited liability company, as well as the direct shareholder of a Czech solely-owned joint stock company. From January 1, 2018, an amendment to the Czech Public Registers Act (the “Act”) will require the ultimate beneficial owners (UBOs) of Czech companies to be identified to the Commercial Register. 

What’s a UBO?

UBOs are defined in terms of “influence,” which is really just an application of well-known concepts of control. Passionate corporate lawyers may wish to study the next paragraph in detail, but mere mortals are free to skip it.

The UBO of a company is a natural person who, legally or in fact, is capable of exercising decisive influence over a Czech legal entity. A rebuttable presumption provides that decisive influence applies where a person: (a) individually or acting in concert with others exercises more than 25% of the voting rights in the legal entity, or whose stake in such legal entity’s share capital exceeds 25%; (b) individually or acting in concert with others controls a legal person under point (a) above; (c) has the right to receive at least 25% of the legal entity’s profits; or (d) if there is no UBO (for instance, in the case of listed companies) or if the UBO cannot be determined under points (a) to (c) above, is a member of the legal entity’s Board of Directors (or a representative of another legal entity that is a member of the first legal entity’s Board of Directors), or is in a position similar to that of a member of the Board of Directors.

So we know what a UBO is under Czech law, but how can we demonstrate that a particular person is the UBO of a particular Czech company? The question becomes trickier the longer the chain of ownership and the more exotic the jurisdiction of the UBO. Relief is at hand. Official materials accompanying the amendment to the Act state that an affidavit will suffice. There is no guidance, however, on the form that this should take or whether the affidavit should be issued by the UBO or the Czech company whose ultimate beneficial ownership is at issue.

When Should I Start To Worry About This?

As stated above, the amendment to the Act comes into force on January 1, 2018. Thankfully, immediate compliance is not required. The Commercial Register need not be notified of the UBOs of Czech companies until December 31, 2018. As a sweetener — if one were needed — the Commercial Register will not charge its usual fees for registering information on UBOs.

Also contrary to the usual rules, no consent is required from a UBO as to his or her entry into the Commercial Register’s database of ultimate beneficial owners.

Starting on January 1, 2019, notifying the Commercial Register of UBOs without undue delay will be required after any change. “Undue delay” is a vague term that, according to common practice, could mean anything from several days to several weeks.

So Who Gets to See This?

Information about UBOs will not be accessible to the public via the Internet. Access will, however, be possible to anyone who demonstrates a legal interest in avoiding money laundering. This could arguably include a party undertaking due diligence prior to transacting with a Czech company or a party engaged in a dispute with one. 

The information is principally intended to be used by the police and other public authorities, such as anti-money-laundering authorities, tax authorities, public prosecutors, and the courts. An excerpt from the database of ultimate beneficial owners will also be provided to the company filing the UBO information.

No Fine, But…

The Act does not (as yet!) provide for fines for breaches of the new rules relating to UBOs. Affected persons should not, however, believe that these rules are toothless. A failure to comply could, for instance, cause problems under procurement rules requiring the full disclosure of ownership structures before a Czech company can enter into a public contract in this country. 

By Christian Blatchford, Partner, and Jakub Porod, Associate, Kocian Solc Balastik

Czech Republic Knowledge Partner

PRK Partners, one of the leading Central European law firms, has been helping clients achieve their business objectives almost 30 years. Our team of lawyers, based in our Prague, Ostrava, and Bratislava offices, has a unique knowledge of Czech and Slovak law and of the business environment. Our lawyers studied at top law schools in the United States, United Kingdom, Switzerland and elsewhere. They also have experience working for leading international and domestic law firms in a number of jurisdictions. We speak your language, too. Our legal team is fluent in more than 15 languages, including all the key languages of the region.

PRK Partners has one of the most experienced legal teams on the market. We are consistently rated as one of the leading law firms in the region. We have received many significant honours and awards for our work. We represent the interests of international clients operating in the Czech Republic in an efficient way, combining local knowledge with an understanding of their global requirements in a business-friendly approach. We are one of the largest law firms in the Czech Republic and Slovakia. Our specialised teams of lawyers and tax advisors advise major global corporations as well as local companies. We provide comprehensive legal advice drawing on our profound knowledge of local law and markets.

Our legal advice delivers tangible results – as proven by our strong track record. We are the only Czech member firm of Lex Mundi, the world's leading network of independent law firms. As one of the leading law firms in the region, we have received many national and international awards, in some cases several years in a row. Honours include the Chambers Europe Award for Excellence, The Lawyer and Czech and Slovak Law Firm of the Year. Thanks to our close cooperation with leading international law firms and strong local players, we can serve clients in multiple jurisdictions around the globe. Our strong network means that we can meet your needs, wherever you do business.

PRK Partners has been repeatedly voted among the most socially responsible firms in the category of small and mid-sized firms and was awarded the bronze certificate at the annual TOP Responsible Firm of the Year Awards.

Our work is not only “business”: we have participated on a longstanding basis in a wide variety of pro bono projects and supported our partners from the non-profit sector (Kaplicky Centre Endowment Fund, Tereza Maxová Foundation, Czech Donors Forum, etc.).

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