New legislation on the registration of beneficial owners

As of 1 June 2021, Act No. 37/2021 Coll., on Registration of Beneficial Owners, will take effect which (unlike the existing legislation) imposes tangible consequences in case of failure to meet the imposed registration obligations. The new act specifies the definition of a beneficial owner and clarifies that there may be several beneficial owners.

The primary obligation to identify and register its beneficial owner rests with the entity whose beneficial owner it is. The responsibility for the meeting of the obligation standardly rests with the members of the entity’s statutory body (statutory executives, members of the Board of Directors).

Certain new data will be recorded in the register, primarily the structure of relationships. Further news is the fact that part of the data recorded in the register will be publicly accessible.

The fundamental change brought by the legislation are sanctions for the failure to meet the obligations. Business corporations may be imposed a fine up to CZK 500,000, however, a significantly greater complication will be their exposure to sanctions under private law. These primarily include for example a ban to pay a profit share, suspension of voting rights at a general meeting (or the right to decide as the sole owner/shareholder), unenforceability of rights and obligations arising from legal acts concealing the beneficial owner, potential penalty for members of the statutory body resulting from a breach of due managerial care – which is crucial, primarily taking into account the fact that annual general meetings are usually held in June.

For more information on the new legislation on beneficial owners registration, refer to an article Act on registration of beneficial owners: a few new obligations, many new sanctions.

Act on registration of beneficial owners Czech Accounting dReport newsletter

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