Avoid Tender Exclusion

Transparency of the ownership structure is a key legal obligation – correct and up-to-date information in the register of beneficial owners and in tender documents is an essential condition for participation. Errors in this area lead to exclusion from the procedure.

Competitors monitor your documentation – opponents deliberately search for inconsistencies in ownership relationships, affiliation data and the entity’s history. Even a minor discrepancy becomes an effective tool for them to file objections.

Verification by contracting authorities is intensifying – contracting authorities and their lawyers are becoming increasingly thorough. They face their own risk of sanctions if they overlook a bidder’s failure to meet the conditions for participation.

Transparency errors have long-term impacts – failure in one tender is only one manifestation. Repeated errors can damage your reputation in the sector and lead to long-term exclusion from future tenders.

What lies behind the concept of transparency in public procurement

Transparency in the context of public procurement is not just a general “being available”. It is a specific legal obligation to disclose, in accordance with Act No. 134/2016 Coll., on Public Procurement (the “PPA”), and Act No. 37/2021 Coll., on the Register of Beneficial Owners (the “RBOA”), complete, accurate and up-to-date information on:

• the actual ownership structure – who actually owns your supplier or company, what the relationships are between shareholders, partners and other persons with influence, all the way to natural persons,
• persons with decisive influence – members of statutory bodies, supervisory bodies, authorised commercial representatives (prokurists) and other persons who have a significant influence on the supplier’s management,
• data from the register of beneficial owners (RBO) arising from your obligation under the RBOA,
• history and past professional misconduct – whether the person or entity has in the past seriously breached obligations towards public institutions, been sanctioned in connection with public procurement, etc. (under Section 48(5) of the PPA).

The PPA (Sections 48 and 77) expressly requires suppliers to prove that they meet the conditions for participation, including the absence of grounds for exclusion, with a specific focus on professional reliability and transparency of ownership. The contracting authority is obliged to exclude a supplier that fails to prove that it meets the basic eligibility requirements or fails to submit the required information on the beneficial owner.

Practical issue: Many small and medium-sized businesses think they can simply list data from the Commercial Register or limit themselves to information about a single executive director. That is not sufficient. The PPA in conjunction with the RBOA requires a deeper look into hidden ownership relationships, including direct and indirect owners, all the way to natural persons.

Most common mistakes competitors exploit

Discrepancies between the register of beneficial owners (RBO) and tender documents

The register of beneficial owners (RBO) is a public register maintained by the Ministry of Justice. Every legal entity, except for cases specified by law (e.g., the state, territorial self-governing units), should have its beneficial owners transparently recorded there.

If the data in the RBO is not up to date, complete, or differs from the data stated in the tender submission (in the so-called “public contract documentation”), you have a problem. The contracting authority is obliged to assess whether the supplier’s beneficial owner corresponds to the information in the RBO.

Example: Company X lists Mr Y in the RBO as a 51% owner. However, in the tender documentation the supplier provides only general information about its legal form – a limited liability company – without mentioning the specific beneficial owner.

A competitor identifies this inconsistency, raises an objection, and this creates a reasonable suspicion of a concealed structure. To avoid its own risk of sanctions from the Office for the Protection of Competition (ÚOHS), the contracting authority excludes Company X from the tender.

Links to persons or entities with “serious professional misconduct”

If your beneficial owner or any other entity in the ownership chain has in the past: been finally convicted of a criminal offence related to its business or another serious economic crime, sanctioned by an administrative penalty (e.g., by ÚOHS for a serious breach of the PPA),

is insolvent or in liquidation, or has been declared bankrupt, or is linked to an entity in respect of which serious professional misconduct has been established (e.g., non-performance of contracts), then you will have a problem in tenders.

The PPA (Section 48(5)) expressly allows for the exclusion of suppliers where serious professional misconduct has been proven that calls their credibility into question. If you do not disclose this in advance and a competitor discovers it during the review, it is a direct ground for exclusion.

Uncertainty in ownership relationships or hidden links

If ownership is structured through several companies in different countries, via trusts or other complex models without a clear explanation of the ultimate beneficial owner, the contracting authority or supervisory bodies may claim that transparency is insufficient. This is especially true if the chain includes foreign elements without proper and verifiable documentation.

Example: Company Z is owned by a Hungarian company, which is further owned by a Swiss trust, which is managed by an Irish agent. Where is the beneficial owner hidden?

If this is not clearly documented and explained, a competitor will raise an objection: “This is not a transparent ownership structure, therefore it is not a reliable supplier,” which may lead to exclusion.

Outdated data or incorrect legal follow-up when changes occur

If there has been a change in the shareholding structure, a merger, a demerger, a change of legal form or another transformation of the supplier, and you have not properly reflected it in the register of beneficial owners and subsequently in the tender documentation, a problem arises. The RBOA (Section 42) imposes an obligation to record changes without undue delay and may impose a fine of up to CZK 500,000 for failure to comply with this obligation.

A competitor will say: “Their data is not up to date” – and that is a reason to exclude the supplier from the tender for failure to meet the conditions for participation.

How the Public Procurement Act works in practice

Process and control checkpoints

Public procurement is typically carried out in the following phases:

• Publication of the tender documentation – the contracting authority publishes the conditions, technical requirements, financial criteria and administrative documents.
• Submission of a bid – the supplier submits the documentation, including a declaration of compliance with all legal requirements (in particular the absence of grounds for exclusion and fulfilment of qualification requirements).
• Administrative check – the contracting authority verifies that all mandatory annexes are included and that the formal requirements are met. This is also where your register of beneficial owners and related documents are checked, including verification against the RSM.
• Check of grounds for exclusion – the contracting authority (or external counsel) verifies whether the data in the register of beneficial owners and in the tender documents match, whether the supplier has committed “serious professional misconduct”, and whether the ownership structure is clearly explained. The contracting authority may also ask the supplier to clarify or supplement this information.
• Evaluation of bids – standard evaluation of price and quality.
• Time limit for submitting objections – competitors may file objections against the contracting authority’s decision, typically against the exclusion of a supplier or against the selection of the most advantageous tender.

It is precisely at points 3 and 4 that you often encounter competitive attacks. If a competitor identifies an inconsistency in your data or the existence of a ground for exclusion, they can effectively use it to file objections.

The attorneys at ARROWS, a Prague-based law firm, can assist you with an effective defence or with objections proceedings if the exclusion was unjustified, as well as with preventive correction of errors.

Table of practical risks and how ARROWS helps

Practical steps: How to protect yourself and prepare for tenders

Transparency audit

Before you apply for a tender at all, have a transparency audit carried out:

• RSM verification: Obtain an extract of your current data from the register of beneficial owners. Is it complete? Is it correct? Is it up to date? Is it compliant with the Act on the Register of Beneficial Owners (ZESM)?
• Comparison with internal data: Compare the RSM data with your internal ownership relationships and statutory bodies. Do they match? Are there any discrepancies?
• Background check: Verify whether you, your beneficial owners or key entities in the chain have so-called “serious professional misconduct” – i.e., sanctions, insolvency, litigation or breaches of legal obligations under Section 48(5) of the Public Procurement Act (ZVZ).

The attorneys at ARROWS, a Prague-based law firm, carry out this audit as a standard part of preparation for larger tenders. They identify risks you might not see yourself.

Documentation and clarification

If you identify any risk or complexity in your structure, do not assume the contracting authority will interpret it on its own. Prepare a brief, clear clarification of your ownership structure:

• A visual chart of the ownership chain up to the natural persons who are the ultimate beneficial owners.
• An explanation of why the structure is the way it is (e.g., “Foreign owner X was established for tax optimisation purposes, but operations take place in the Czech Republic”).
• Evidence of legitimacy (e.g., copies of foreign registration, creditworthiness reports, etc.).
• An explanation of any “problematic” elements (e.g., “Board member W was sanctioned in the past for X, but since then new internal mechanisms have been adopted to prevent recurrence”).

This way you are not merely “reactive” – you are proactive and build trust.

Formal readiness

When submitting the tender itself:

• Verify that all documents are up to date and signed by authorised persons.
• Attach all mandatory affidavits confirming that the legal conditions have been met.
• Have the form and content reviewed by an external lawyer from ARROWS, a Prague-based law firm – errors in the submission are later difficult or impossible to remedy (Section 46(3) and Section 76 of the Public Procurement Act (ZVZ)).

Have the form and content reviewed by an external lawyer from ARROWS, a Prague-based law firm – errors in the submission are later difficult or impossible to remedy.

Monitoring and defence

After submitting the tender:

• Monitor the contracting authority’s public communications – if a notice of motions or objections appears, respond in time within the applicable deadlines.
• Be prepared for questions from the contracting authority – if the contracting authority contacts you with a query regarding transparency (e.g., under Section 46(3) of the Public Procurement Act (ZVZ)), respond fully and without undue delay.
• If you receive an objection from a competitor – contact the lawyers at ARROWS, a Prague-based law firm, who will help you with your legal defence and with safeguarding your position in the procurement procedure.

If you receive an objection from a competitor – contact the lawyers at ARROWS, a Prague-based law firm, who will help you with your legal defence and with safeguarding your position in the procurement procedure.

Final summary

Transparency in tenders is not merely an administrative matter. It is a direct path either to success or to exclusion from lucrative contracts. Errors in information on the ownership structure, discrepancies between the register of beneficial owners and the tender documentation, or hidden links to entities with serious professional misconduct are exactly what competitors look for and wait for.

Many entrepreneurs underestimate the administrative and legal preparation of a tender and focus only on technical quality, price and references. However, this is a fundamental mistake. Competitors often use administrative and legal errors to eliminate insufficiently prepared bidders.

Prevention is the cheapest and most effective solution: have a transparency audit carried out, verify and update the data in the register of beneficial owners, prepare a clear and verifiable explanation of your structure, and only then submit bids. If an issue arises, do not wait – respond quickly and competently.

The lawyers at ARROWS, a Prague-based law firm, focus specifically on public procurement and transparency. They know the typical mistakes in tenders and can eliminate them effectively. If you want to increase your chances of success and avoid exclusion due to administrative and legal errors that are so common in tenders, contact ARROWS, a Prague-based law firm, at consultation@arws.cz.

The initial investment in a legal audit of transparency and in preparing the documentation before launching the tender often pays for itself already with the first successfully awarded tender. The attorneys at ARROWS, a Prague-based law firm, offer precisely such preventive solutions.

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