May 24

Register of Beneficial Owners: Part III – Sanctions and Deadlines

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In the previous parts, we informed about the new duties imposed on entrepreneurs by new Act No. 91/2021 Coll., regulating the Register of Beneficial Owners (the “RBO Act) and about the modes of registration into the Register.

In this Part, we will inform you about the sanctions which might be imposed under the RBO Act for not registering your beneficial owner into the Register and on the deadlines for registering.

Sanctions for not registering your beneficial owner into the Register

First of all, any agreements concealing the beneficial owner are unenforceable under the RBO Act. Therefore, the courts should not entertain any disputes arising from any commission contracts or similar agreements with “white horses” through which a legal entity is controlled.

A business corporation is further prohibited by the RBO Act from paying any profits to the beneficial owner of the corporation who is not registered in the Register and to any legal entity and trust of which he is also the beneficial owner. A business corporation is further prohibited by the RBO Act from paying profits to any legal entity or trust with no beneficial owner registered in the Register.

The beneficial owner of a business corporation who is not registered in the Register may not exercise his voting rights in the decision-making of the corporation’s supreme body, and neither may a legal entity or a person acting for the account of a legal arrangement of which he is also the beneficial owner. Voting rights in the decision-making of the corporation’s supreme body may not be exercised by a legal entity or a person acting for the account of a trust with no beneficial owner registered in the Register of Beneficial Owners either.

Last but not least, the RBO Act introduces administrative transgressions where a fine of up to CZK 500,000.00 might be imposed on the registrant for not registering the beneficial owner into the Register and on the beneficial owner for the failure to provide collaboration to the registrant in ascertaining who the beneficial owner is. In both cases, the imposition of a fine is subject to the court finding, in the so-called discrepancy proceedings (Section 44 of the RBO Act), that the RBO Act has been actually breached.

Deadlines for registration in the Register of Beneficial Owners

As we already mentioned in Part I, a registrant has a duty to get valid information about the beneficial owner registered without undue delay after the operative event occurs. Under the RBO Act, the deadline is prolonged for some entities and a so-called transitional period of 6 months/ 1 year is provided. During that period, the entities will not be imposed any sanctions for the failure to comply with their duties under the RBO Act.

A trustee who had information about the beneficial owner of the trust registered into the Register of Beneficial Owners under the Act on Public Registers, as effective before the effective date of the RBO Act, has a duty to make the valid information comply with the requirements of the RBO Act within 1 year from the effective date of the RBO Act.

A trustee who did not have any information about the beneficial owner of the trust registered into the Register of Beneficial Owners under the Act on Public Registers, as effective before the effective date of the RBO Act, has a duty to register valid information about the beneficial owner within 6 months from the effective date of the RBO Act.

A business corporation that had information about its beneficial owner registered into the Register of Beneficial Owners under the Act on Public Registers, as effective before the effective date of the RBO Act, by 1 January 2019, if incorporated by 31 December 2017, or within 15 days of its incorporation, if incorporated from 1 January 2018, has a duty to make the valid information comply with the requirements of the RBO Act within 6 months from the effective date of the RBO Act.

Therefore, a business corporation that has not had any information about its beneficial owner registered into the Register of Beneficial Owners under the Act on Public Registers, as effective before the effective date of the RBO Act, will have to register valid information about its beneficial owner without undue delay after 1 June 2021.

Mgr. Alexandra Kábrtová, Junior Attorney
JUDr. Vladimíra Pajerová, Attorney
Pajerová Sedláčková ADVOKÁTKY s.r.o.
20 May 2021