The Czechia is looking for real owners. Will the amendment to the law reveal who owns Alza or Notino?

The Czechia is looking for real owners. Will the amendment to the law reveal who owns Alza or Notino?
The Czechia is looking for real owners. Will the amendment to the law reveal who owns Alza or Notino?

Last year’s law, which forced companies to indicate their real owner in the records, was amended after a year. The register, according to which today the largest Czech online marketplace Alza is owned by lawyer Pavel Steinwicht and the owner of the billion-dollar e-shop Notino is the Austrian Gerd Hermann Jelenik, may get a new look from October 1.

The European Commission requested the Czech Republic to change the law. The previous wording did not correspond to the directive from which the regulation is based. With this amendment, the Brussels executive has even conditioned the withdrawal of money from the National Recovery Plan, within the framework of which we are to receive up to seven billion euros.

The amended version of the Act on the Registration of Beneficial Owners thus, among other things, no longer distinguishes the beneficial owner as a person with ultimate influence or the ultimate beneficiary of his activity. Under the new definition, a beneficial owner is simply someone who ultimately owns or controls the company.

The change, which at first glance seems like a formality, will have a real impact for many companies.

“Companies, as registrants, have an obligation to ensure that their registration of the real owner or owners corresponds to reality and to how this term is explained in the current wording of the law,” explains Jindřich Král, lawyer and partner of the Glatzová & Co. law firm. and specialist in company law.

So who exactly is the real owner according to the amendment?

Any natural person who ultimately owns or controls a legal entity or legal arrangement. In addition, the law works with guidelines according to which certain persons are automatically in the position of the real owner, regardless of whether they can realistically control the legal entity. The real owner will often be natural persons, about whom we would not say so at first glance.

What are the clues?

The amended law provides that a corporation is ultimately owned or controlled by any natural person who, directly or indirectly through another person or legal arrangement, has more than twenty-five percent of the voting rights or beneficial ownership, that is, an interest in profits, other equity, or liquidation balance .

Newly, it is sufficient if a person owns a share in the corporation greater than twenty-five percent, regardless of whether his voting rights or rights to benefits also correspond to this.

Is it a formality, or will the amendment have a wider impact in practice?

It depends on how complex the company’s ownership structure is. For example, if he has only one partner, a natural person at that, the real owner will of course remain the same and the amendment is just a formality. For companies with a branched ownership structure, where ownership shares can be chained, companies will have to change the entry in the register.

Is the new regulation more benevolent for companies?

On the contrary – in the case of companies with a more complex ownership structure, additional natural persons who, according to the original wording of the law, were not real owners will now have to be registered as real owners.

The real owner can now also be a person who exercises decisive influence in the corporation by means other than just ownership of a share. What does this mean in practice?

This group should simply include those natural persons who can actually influence the behavior of the legal entity. It is still true that if the company has not registered the beneficial owner or has not registered it correctly, it can be subject to so-called irregularity proceedings before the court. The court that has jurisdiction over the registration will invite the company to eliminate these irregularities or to refute them and will set a reasonable deadline for this.

What if he doesn’t respond to the challenge?

Then the court will start the irregularity procedure. As far as sanctions are concerned, it is possible to impose a fine of up to half a million crowns on both the company and the “non-cooperating” real owner for non-fulfillment of obligations in the registration of real owners.

Another significant sanction is the prohibition of exercising voting rights for the period when the beneficial owner is not registered, or the prohibition of paying such an unregistered beneficial owner a share of profits or other benefits.

Has something similar already happened in practice?

Personally, I have so far only encountered irregularity proceedings in situations where the company did not register any real owner. In addition, I can confirm that persons liable according to the Money Laundering Act, typically banks, which are obliged to report any discrepancies they find in the records of beneficial owners, carefully check the correctness of the records.

Has anything else changed in the law that will have a real impact?

Among other things, the range of persons who will have to register the real owner has been expanded. The obligation will now concern, for example, communities of unit owners, churches and religious societies, or political parties and movements, as well as industry organizations. In addition, subsidy providers will be given access to all data on beneficial owners.

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