Who is the Beneficial Owner?
Pursuant to Section 4 (4) of Act No. 253/2008 Coll., on Certain Measures for the Prevention of Money Laundering and Terrorist Financing (hereinafter the “AML Act”), the beneficial owner is defined as a natural person who is factually or legally enabled to directly or indirectly exercise controlling influence over a corporate entity, a trust, or another legally-organised entity without a legal personality status. As such, the beneficial owner is always a specific natural person (or multiple natural persons). Moreover, the AML Act stipulates matters that may indicate the beneficial owner. However, the fulfilment of these matters does not necessarily have to mean that a particular individual is a beneficial owner. Therefore, it shall always be assessed whether the given individual is enabled to exercise a controlling influence or not.

Companies are obliged to identify their beneficial owners and record topical information that enables the identification and verification of the identity of the given beneficial owner, including information on matters establishing the position of the beneficial owner and/or other types of substantiation as to whether the given individual is deemed a beneficial owner.

Keeping Records on Beneficial Owners
The Register was established pursuant to a requirement arising from the Fourth AML Directive on maintaining beneficial ownership data in central registers, the goal of which is having in place up to date and accurate information on the ultimate recipients of funding. Such data shall be principally accessible for government authorities, financial intelligence units and liable parties when implementing measures for client verification purposes. This is due to the fact that under complex corporate relationships, beneficial owners can be easily disguised.

The Register is a non-public one. The information on beneficial owners is neither disclosed in addition to copies of statements from public registers, nor is it made publicly available. The Register can be accessed by a limited, yet relatively broad group of parties. In addition to governmental bodies, this principally includes the representatives of so-called liable parties who are obliged under the AML Act to ensure the verification of beneficial owners (this particularly means banks and other financial institutions). It shall be noted that by having made the first entry in the Register, the whole process is definitely not completed. The Register records shall be up to date and accurate.

What Are the Consequences of Failing to Record Beneficial Owners in the Register?
Corporate entities which fail to record and provide evidence on the information on their beneficial owners in the Register by 1 January 2019 are currently not facing any direct sanctions. However, they may face problems when applying for financial services, as pursuant to the AML Act financial institutions are obliged to verify their clients, which also includes identifying and verifying beneficial owners. Therefore, in the event of performing the verification procedures and revealing information discrepancy (or non-availability) by financial institutions, obtaining a particular banking product or service may become complicated. The corporate entities in question may face additional issues when bidding for public contracts or when applying for EU grants. According to Act No. 134/2016 Coll., on Public Procurement, the ordering parties under public tenders should be able to obtain information on beneficial owners from the Register.

Therefore, if no information is in place in the Register or if it contradicts the beneficial owner information declared in another way, the chances of succeeding in the tender will be lower for the given corporate entity. Pursuant to the notice published on the website of the Czech Ministry of Industry and Trade by the managing body of the Operational Programme “Entrepreneurship and Innovation for Competitiveness”, the calls published since June 2018 have included a criterion requiring that the applicants for grants under individual programmes exclude entities whose beneficial owner has not been recorded in the Register as of the date on which the grant application is filed.

Is It Hard to Make an Entry in the Register?
For some corporate entities with simple ownership structures, it will not be complicated to define the beneficial owner and record it in the Register. However, in our day-to-day business we encounter ownership structures, adjustments in voting rights of corporate bodies, and the like, which make it hard even for the companies themselves to define their beneficial owners seamlessly (this does not necessarily have to apply solely to large companies). This is due to the fact that the definition of the beneficial owner, which is very clear at first sight, bears many problems in legal terms. For instance, this may typically include companies with ownership structures in which foreign corporate entities participate.

Attention shall be paid by companies operating in multiple countries, as similar registers and obligations may exist abroad (principally in the EU), where however, the definition of the beneficial owner may vary, due to which also other types of entities may be recorded in such registers. For instance, according to US legislation, entities holding no less than 10% of voting rights qualify as beneficial owners, whereas in most EU countries, this applies to entities holding 25% of voting rights.