Skutečný majitel firmy

Why is the beneficial owner such an important topic? More than just bureaucracy

However, properly maintained records also have practical advantages for your business. It is your calling card of transparency, which is checked by banks, business partners, and state authorities. Do you need to apply for a loan, a subsidy, or participate in a public tender? In all these cases, the correct registration of the beneficial owner will be one of the first things the other party will verify.

An incorrect or missing entry is therefore not just a formal offense. It is a public signal that can damage your reputation and complicate key business operations. At ARROWS, we always emphasize to our clients that the proper registration of beneficial owners is not just about complying with the law, but about building credibility in the market and preventing risks that can seriously threaten the company.

Who is a beneficial owner? The new definition and practical examples

A fundamental change came with the 2022 amendment to the law, which abandoned the previous complex concepts of "ultimate beneficiary" and "person with ultimate influence." The new definition is simpler and more straightforward.

A beneficial owner is any natural person who ultimately owns or controls your company or legal arrangement.

But how do you identify such a person in practice? The law sets out several material criteria:

• Share in voting rights or registered capital: A natural person who directly or indirectly holds a share of more than 25% is considered a beneficial owner. So, if Mr. Novák owns
  30% of company A, a limited liability company, he is its beneficial owner.

• Share in the benefits: Likewise, a beneficial owner is anyone who is entitled to a share of more than 25% of the profits, other equity, or liquidation surplus.

• Exercising decisive influence: This is a key criterion for more complex structures. It refers to the ability to enforce one's will in the company's decision-making, even without a direct share.

Many companies registered under the old rules and believe they have everything in order. However, the new definition is broader and may have changed who the beneficial owner of your company is. Relying on an old registration or an automatic data transfer from the register is risky and can lead to unknowingly violating the law.

Imagine Mr. Dvořák. He does not own your company A, a limited liability company, directly, but he owns 100% of company B, which holds a 50% share in company C, which in turn owns 60% of your company A. Mr. Dvořák therefore ultimately controls your company and is its beneficial owner. 

Unravelling such ownership chains (so-called "chaining") is absolutely essential and requires a careful analysis of the entire structure, often using a graphical representation (an organigram). It is in these complex structures that mistakes are most often made. Our Prague-based lawyers at ARROWS specialize in analysing such chains and can prepare a legal opinion for you, giving you the certainty that you have correctly identified the beneficial owner and will thus prevent future problems.

When the owner cannot be determined: Who is the substitute beneficial owner?

What if, after a thorough analysis, you find that no natural person meets the criterion of a share over 25% or exercises decisive influence? This can happen, for example, in joint-stock companies with a dispersed ownership structure or in housing cooperatives with a large number of members.

For these cases, the law introduces the concept of a so-called substitute beneficial owner. This is not an escape route, but a solution defined by law. In such a case, all persons in top management are considered beneficial owners.

Specifically, this refers to every member of the statutory body – i.e., all executive directors in a limited liability company or all members of the board of directors in a joint-stock company.

However, registering a substitute owner is not a mere formality. You must be able to prove at any time that you first conducted a proper analysis and that it was genuinely impossible to determine a material owner. Simply stating that you do not have one is not enough. At ARROWS, we will help you prepare all the documentation that proves you have proceeded correctly, thus protecting the executive directors from any potential doubts from the authorities.

The registration process: A step-by-step guide to registration

Responsibility for correct and up-to-date data in the register always lies with your company, referred to in the law as the "registering person". It is your duty to actively identify the beneficial owner and ensure their registration without undue delay.

There are two main ways to complete the registration:

1. Through the competent registration court: The application is submitted electronically via an intelligent form.

2. Through a notary: A notary can perform the registration at your request, which is often a faster and simpler option.

The application must be accompanied by documents proving the stated facts, if they cannot be verified from public registers. These are mainly identity documents for foreign persons and documents proving the ownership structure, such as articles of association, lists of shareholders, or the aforementioned organigrams.

Many companies mistakenly rely on the so-called "automatic transfer," where owner data is automatically transferred from the Commercial Register. However, this mechanism is deceptive.

Automatic transfer often fails to reveal more complex ownership ties and does not account for informal influence. Relying on it without your own verification is one of the most common and riskiest mistakes. At ARROWS, we will not only handle the registration itself for you, but we will first review your current situation, verify the data, and prepare all the documents required under Czech legislation. This will save you time and, above all, protect you from the risks arising from incomplete or incorrect data.

Errors in the register and their harsh consequences: What are the real risks?

The consequences of an incorrect or missing registration are much more serious than just the threat of a fine. The law has introduced private-law sanctions that can paralyze the entire company's operations and cause significant financial losses. If a court finds a problem, it will initiate so-called discrepancy proceedings and enter a publicly visible note of discrepancy in the register – a warning signal for all your partners.

The consequences can be devastating:

• Prohibition on exercising voting rights: An unregistered beneficial owner may not exercise their voting rights at a general meeting. This can completely block the adoption of key decisions, such as approving financial statements, electing executive directors, or deciding on strategic investments.

• Prohibition on the payment of profits: The company may not pay out a share of profits or other benefits to an unregistered beneficial owner or to any company owned by that owner. This means the owners cannot access their money.

• Personal liability of management: If the executive director or board of directors approves the payment of profits despite the prohibition, they are breaching their duty of due managerial care. They can then be held liable for the resulting damages with their entire personal assets.

• A fine of up to CZK 500,000: In addition to the above, the company also faces a monetary penalty for the offense, which can be imposed repeatedly.

The sanctions are designed to be impactful. Fortunately, if a court initiates discrepancy proceedings, all is not lost. ARROWS lawyers can effectively represent you in these proceedings, communicate with the court, and help resolve the discrepancy as quickly as possible before the worst happens.

How can ARROWS help you ensure peace of mind and certainty?

The issue of beneficial owners is complex, but with expert help, you can handle it without stress and risk. At ARROWS, we offer comprehensive services to cover all your needs:

• Not sure who your beneficial owner is?
  We will provide legal consultations and prepare an expert legal opinion that precisely identifies the beneficial owner within your structure.

• Do you have a complex ownership structure?
  We will analyse it and prepare complete documentation, including organigrams, to flawlessly document your situation for the court or notary.

• Want to avoid mistakes and sanctions?
  We will handle the entire registration or review process for you and prepare documentation that will protect you from fines and other penalties.

• Need your employees and management to understand the rules?
  We offer expert training for employees or management that explains their obligations and helps prevent risks. Participants will receive a certificate.

• Are you facing discrepancy proceedings?
  We will represent you before courts and administrative authorities and actively work to resolve the issue.

• Need certainty in your contracts and internal processes?
  We will prepare or review your contracts and draft internal policies that incorporate the obligations arising from the Register of Beneficial Owners.

At ARROWS, we deal with the issue of beneficial ownership registration on a daily basis. We have experience with hundreds of cases, from simple limited liability companies to complex international holdings. We know where the risks are and how to prevent them.

Don't wait for the court to contact you or for a bank to turn you down. Contact us today to arrange a no-obligation consultation. We will be happy to help you put everything in order and ensure your peace of mind.