1. New Act
Dear clients, we would like to inform you that the new Act on Registration of Beneficial Owners (“AML Act”) brings significant changes in the regulations for recording of beneficial owners. Implementation of penalties for contravention of record-keeping obligations is fundamental. Members of statutory bodies, beneficial owners, but also obliged entities, such as accountants, auditors and tax advisors, pursuant to the AML Act therefore have a common interest in verifying current information in the retister and correcting it if necessary.
2. Fines
In contrast to the arrangement until now, which does not impose penalties for non-fulfilment of record-keeping obligations, the new arrangement brings significant penalty mechanisms in the form of fines and limitation of a shareholder’s fundamental rights.
The fine for a contravention by a company can reach an amount of CZK 500 thousand and can be imposed
- for contravention of the obligation to enter the beneficial owner into the register of beneficial owners, and this even after a reasonable deadline set by a court;
- for not arranging entry of new data after a court has ruled that there are discrepancies in entries into the register.
The fine for a contravention by a beneficial owner can reach an amount of CZK 500 thousand and can be imposed
- if they do not inform the company that they have become the beneficial owner or does not provide the necessary cooperation for the needs of making an entry into the register.
3. Limitation of a sharehoder’s fundamental rights
The Amendment further imposes another penalty mechanism in the form of limiting a shareholder’s fundamental rights. The beneficial owner who is not entered in the register cannot exercise voting rights and has no right to a share in the company profits. The company must not pay this person a share in the profit or any other benefits payable (e.g. distribution from equity reduction such as recuction of other capital funds). Problems can arise from these penalties, both for unrecorded beneficial owners and for the members of the company statutory body, who could potentially be liable for the damage caused by contravention of the care due of a prudent businessperson.
4. New obligations of obliged entities pursuant to AML
The AML Act Amendment implements an obligation on an obliged entity to draw attention to discrepancies if they are of the impression that the data in the register do not correspond with the real state. Auditors, tax advisers and accountants are among these entities. The obliged entity has to inform clients on the ascertained discrepancy, and if the discrepancy is not removed or refuted by the client, the obliged entity has to notify a court about the discrepancy. If the obliged entity does not fulfil this obligation they face a fine of up to CZK 1,000,000.
In view of the above-mentioned facts, we recommend that you verify the correctness of data stated in the register of beneficial owners, and in the event of any questions, contact your lawyer.