Don't forget to register the beneficial owners

For several years now, it has been compulsory in the Czech Republic to record the beneficial owners of companies in the register of beneficial owners maintained by the Ministry of Justice. However, this obligation is still quite often neglected. This requirement is based on the EU directive on combating money laundering and terrorist financing.

Author of the article: ARROWS (Mgr. Pavel Čech, office@arws.cz, +420 245 007 740)

Who is the real owner?

A beneficial owner is a natural person who directly or indirectly controls the company, i.e. owns more than 25% of the shares or voting rights or has other forms of decisive influence. If such a person cannot be identified, a member of the statutory body shall be entered.

How to register?

The registration is done through the electronic application of the Ministry of Justice on the justice.cz website, or you can use the services of a notary who will carry out the registration for you.

The procedure includes:

1. Submitting a form with the identification data of the company and the beneficial owner.
2. Attaching documents proving the ownership structure (e.g. articles of incorporation, shareholders' agreements).
3. Signature by an authorized person and submission of the application.

What are the penalties for non-compliance?

If a company fails to comply with the obligation to register the beneficial owner, the following are the main risks:

• A fine of up to CZK 500,000 for the company.
• Penalty of not being able to pay out profits - the company cannot pay out a share of profits to a person who has not been properly registered.
• Restricted access to finance - banks and other institutions may refuse to cooperate.
• Voting rights system - an unregistered beneficial owner cannot exercise voting rights in the company. This can have a major impact on decision-making in the company and limit its operations.
• Personal liability of members of statutory bodies - if registration is not complied with, responsible members of statutory bodies may face liability for damages or non-performance.

Recommendations for entrepreneurs

• If you have not yet registered a beneficial owner, do so as soon as possible.
• In the case of a more complex ownership structure, consult a lawyer.
• Cross-check that your registrations are up to date, e.g. when a shareholder changes.

Conclusion

Beneficial ownership registration is a key record for business transparency and for the fight against money laundering. Failure to comply with this obligation can have serious consequences, so do not hesitate to check that your company's records comply with current legislation.

Do you need help with record keeping or a consultation? Not sure if you have the beneficial owners registered correctly? At ARROWS we can provide you with a full legal service to avoid problems.