The Register of Ultimate Owners (Register) was first embedded in the Czech law two years ago. As of 1 January 2018, all corporate entities have been obliged to ensure that information on their ultimate owners is entered in the Register kept by the Municipal Court. However, this has not been regulated by a separate law so far. The Ministry of Justice submitted a bill on the Register of Ultimate Owners (Bill). The aim of the Bill is to transpose the requirements for the Register under Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (so-called V. AML Directive). The planned effective date of the law was 1 December 2020, but it will most likely not occur until the beginning of spring 2021.
The main changes introduced by the Bill include i) penalties for failure to fulfil obligations, and ii) partly public access to the Register.
Penalties
Companies will be penalized after the effective date of the law, and the ultimate owners will also be restricted in their rights.
- If correct publishing of the information on ultimate owners is not ensured, or if necessary cooperation with the Municipal Court is not provided, corporate entities may have to pay a fine of up to CZK 500,000.
- If the ultimate owner is not disclosed in the Register, the company cannot pay the ultimate owner a dividend or other own resources, not even to the legal entity of which it is the ultimate owner. At the same time, this ultimate owner and the legal entity of which they are the ultimate owner cannot exercise their voting rights or decide as a sole shareholder.
- Further, the company also cannot pay a dividend or other own resources to a legal entity or legal arrangement that has no ultimate owner disclosed. At the same time, this legal entity cannot exercise voting rights or make decisions as its sole shareholder.
Publishing of Information
The Register is not yet a public source of information. Only a selected few have access. However, with the law coming into effect, the Register will become partially open to the public. Some information from the Register will be available in the form of an electronic statement as well as information from the Company Register. The publicly accessible information will include the name of the individual, the country of residence, the year and month of birth, a description of the relationship structure and the date when the individual became an ultimate owner. The reason for this measure is to ensure greater transparency of corporate entity ownership structure.
Changes in Published Information
If there is a change in the ownership structure or legal arrangement, the entity is obliged to publish the changes. For example, if one of the ultimate owners no longer holds a share in the corporate entity, it is necessary to publish the last date on which the individual was still the ultimate owner. Facts which necessitate changes to the published information may also arise during the transformation of corporate entities. The same procedure has to be applied by corporate entities if any of the published information on the ultimate owner (individual) has changed, for example the country of residence, citizenship, name, address of residence.
Should you be interested, we are ready to offer our services in this regard. For more information please contact Katerina Mikulkova, Tax Consultant, at katerina.mikulkova@tpa-group.cz