Act on Registration of Beneficial Owners No. 37/2021 Coll. (the Act) implements the 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 purpose of money laundering or terrorist financing ("V. AML Directive"). The Act came into effect on June 1, 2021.
The Act is amended by the law no. 245/2022 Coll., which will come into effect on 1 October 2022, (Amendment) in response to requests from the European Commission ("Commission").
The Commission has made the amendment conditional on payment requests under the National Recovery Plan, which serves to mitigate the impact of the COVID-19 pandemic on the domestic economy and to restart it.
Main changes to the Act
The primary reason for the Amendment is therefore the fact that the European Commission criticises the Czech Republic for not complying with the wording of the V AML Directive in the following cases:
- the definition of 'beneficial owner', in particular the redundancy of the concept of final recipient;
- the lack of identification of beneficial owners for special types of private legal entities, in particular the existing exceptions under Section 7 of the current wording of the Act.
New definition of beneficial owner
An essential element of the Amendment is the abandonment of the two-track definition of beneficial owner through the terms of the “end recipient” and the “person with end influence”, which has significantly simplified the definition of beneficial owner. Newly, the beneficial owner will be any natural person who ultimately owns or controls a legal entity or legal arrangement. Other terms are amended in connection with this change.
The key concepts are therefore the concepts of "ownership" and "control", which, according to the explanatory memorandum, must be interpreted extensively and rather in their lay sense as "domination" of a legal person, and therefore not only in their legal meanings.
In Section 4, the Amendment comprehensively changes the criteria for determining which natural person owns or controls a given corporation, taking over the wording from the V. AML Directive. Unlike the current wording of the Act, it will not only be a "pointing at a person with end influence", but an unconditional sign that the person is the beneficial owner. The new definition contains both exact criteria (25% share of voting rights, etc.) and soft criteria – the exercise of decisive influence in the corporation by other means (which it then further develops). These criteria are set by the law as an alternative, so it is sufficient to meet at least one of them.
Exception limitations
Until now, in Section 7 of the current wording of the Act, there was an exception according to which a number of categories of entities did not have beneficial owners. Typically, these were the state and territorial self-governing units (municipalities, regions) and entities owned or established by them, such as state enterprises, schools or public research institutions. At the same time, however, other entities, such as associations of unit owners or political parties, were also found in this provision.
In the Amendment, this exception is limited to only two categories of entities. The exception should apply in particular to the state and territorial self-governing units and entities financed by them or decisively influenced by them, as well as a rebuttable presumption of the absence of a beneficial owner, e.g. in the case of state-owned enterprises. In the case of business corporations, direct or indirect ownership of shares in them is required by the state or a territorially self-governing unit (i.e. a region or municipality). A number of categories of entities – svj, hunting community, political parties, churches or trade unions – have potentially fallen out of the exception, unless they meet the condition of financing or decisive influence of the state or territorially self-governing unit.
Transitory period of 6 months
Obecně platí, že entity, které si splnily evidenční povinnost podle dosavadní právní úpravy, budou mít na přizpůsobení údajů Novele ZESM lhůtu šesti měsíců, po kterou se na ně nebudou vztahovat negativní následky nesrovnalostí v Evidenci.
As regards entities that did not have a beneficial owner before the effective date of the Amendment (e.g. flat owners association, political parties, trade unions), even in this case they are obliged to ensure that the data in the Register correspond to the Amendment within six months of the effective date of the Amendment. Here, too, the Amendment provides for automatic transcription of the necessary information from the relevant registers.
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