New Regulation of Beneficiary Owners

The new Czech law on the registration of beneficial owners had to be substantially amended just about a year after its adoption. This was due to pressure from the European Commission, which criticized some parts of the Czech legislation for being inconsistent with the regulation and objectives of the European Anti-Money-Laundry (AML) Directive.

The Commission was particularly concerned about the definition of the beneficial owner and some exceptions to the obligation to register. The Czech side did not manage to convince the Commission of the functionality of its concept. Even after a year of negotiations it finally gave in to the Commission's opinion and amended the Czech law on the registration of beneficial owners.

The amendment abolishes the existing two-component definition of the beneficial owner based on the concepts of ultimate beneficiary and person with ultimate influence. In particular, the concept of ultimate beneficiary, which according to the Commission is not included in the definition of the AML Directive, is abolished. The existing definitions are therefore replaced by a very general definition taken from Article 3(6) of the AML Directive. The indication of the nature of the beneficial owner's position will be reduced to whether it is direct or indirect and whether it is a material or formal beneficial owner. Still, only a specific natural person can be a beneficial owner. Also, there may be more than one beneficial owner.

Under the new law, a beneficial owner is any physical person who ultimately owns or controls a legal entity or legal arrangement. Such ownership or control is based on either of the following: i) an interest in the corporation or an interest in voting rights greater than 25%; ii) an interest in profits, other equity or liquidation proceeds greater than 25%; iii) exercising a controlling influence in the corporation or in corporations that individually or collectively have an interest in the corporation greater than 25%; or iv) exercising a controlling influence in the corporation by other means.

By Mgr. Radek Werich

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